Google-apple valuation gap widest since 2005

Google Inc. (GOOG)’s prospects haven’t looked so promising to investors relative to Apple Inc. (AAPL) since before the iPhone was introduced.

Google’s shares, which climbed to a record yesterday, are now trading at 25 times profit, compared with a price-to- earnings ratio of less than 10 for Apple, according to data compiled by Bloomberg. That gap is at its widest since June 2005, two years before competition between the two companies in mobile devices began to intensify.

Investors are willing to pay more for each dollar of Google’s earnings relative to Apple amid optimism that Google, with more than 40 percent of the U.S. online-advertising market, will command even more of the $37.3 billion that businesses spend each year to reach Web audiences. Google also has used an alliance with Samsung Electronics Co. to gain share in mobile software, feeding the competitive threat weighing on Apple as investors await the next big product from the iPhone maker.

“There’s only one company benefiting from all the growth areas of the Internet — be it video, mobile, local, social, display advertising,” said Sameet Sinha, an analyst at B Riley & Co. “Apple has just done well in devices, nothing else.”

Google rose 0.3 percent to the equivalent of $841.01 in German trading at 9:12 a.m. in Frankfurt, and Apple advanced 0.5 percent to the equivalent of $433.13. Google’s U.S. shares have added 35 percent in the past 12 months.