Capitalization is major factor for any company’s image. Moreover, it helps to determine the real value of any company. For the first time in history, Apple, a tech giant, has outpaced Gazprom, an NG giant, in terms of market capitalization.
What is the reason for that? Is technology more valuable than energy sources? Eugene Olkhovsky, ’s leading expert in financial market will try to answer these questions.
Gazprom – World Leader In Terms Of Natural Gas Production And Storage
Gazprom, is a Russian energy giant specializing in natural gas production. It supplies the needs of Russia and Europe. Last year, Gazprom made a record increase in NG production and storage due to successful prospecting work and more efficient production.
Following the principle of diversification, Gazprom is engaged in the production of several types of natural gas, including liquefied natural gas (or LNG). For now, Gazprom is the only Russian company producing LNG. It is also working on the production of synthetic liquid fuels.
Diversification ensures stable domestic and external demand for Gazprom’s products.
The following charts represent the results of Gazprom’s activities:
The “Net Profit” figures increased in 2011 mainly due to “Proceeds” and “Other Sources of Income”. The major reasons for higher proceeds are higher sales volume and higher NG prices. “Other Sources of Income” brought more money due to the appreciation of the company’s stock. In 2011, Gazprom’s income per share more than doubled as compared to 2010.
Gazprom is the global leader in terms of NG production and storage:
- 18% share in global NG reserves;
- 72% share in Russian NG reserves;
- 1,4 NG reserve recovery ratio;
- 15% share in global NG production;
- 77% in Russian NG production;
- 6 988 functioning NG wells in Russia;
- 9 % share in Russia oil production;
- 6 151 functioning oil wells in Russia;
Gazprom can boast the world’s biggest NG pipeline with a well-developed infrastructure in Russia and abroad. The company accounts for 17% of Russia’s energy needs. It is the biggest NG exporter to the CIS and the EU (27% of the European NG market).
Despite the crises in Europe and the global economy, the global population and the quality of life will continue growing, especially in emerging economies. Obviously, these factors will favor the demand for energy carriers like natural gas and crude oil.
According to various international energy agencies and organizations, the global consumption of energy will grow by 40% in 2 decades. At the same time, fossil fuels will be able to satisfy only 805 of the energy needs. Oil will remain the major energy carrier, accounting for 30% of the energy needs. The share of renewable sources of energy may increase up to 15% while the global consumption of natural gas will be growing at an unprecedented pace to reach 25% of the global consumption of energy.
As compared to 2010, the global demand for natural gas is expected to boost by 50% in 2030. Obviously, Gazprom will benefit from that.
According to , Gazprom’s stock is trading around a strong level of support, which was the starting point of multiple price rallies (just look at the chart below). Analysts’ long-term forecasts are bullish. The stock market experts of assume that Gazprom’s stock may be included in your investment portfolio. The optimal investment period is 6 months or more. The price targets are 170,195. The risk scenario includes poorer fundamentals shown by Gazprom itself or by the Russian economy in general.
Apple – Major Tech Giant
Apple Inc. (NASDAQ: AAPL) is a US multinational corporation that manufactures and sells software, computers and consumer electronics, including portable players, tablets and smartphones.
The best-Known products include:
- Macintosh
- Mac OS X
- iPod
- iPad
- iPhone
- iTunes
- Safari
- iOS
As of September 24th 2011, Apple owns 357 retail stores in 11 countries around the world and is said to be the world’s number one in terms of market capitalization. In early 2012, Apple’s capitalization exceeded $600 bn. It employs 60 400 full-time employees and 2900 part-time employees.
Apple has an army of fans around the globe. They are so devoted to the company’s image and philosophy that can spend days and nights standing in endless lines to buy a new product on the very day it is released.
reports that a couple of weeks ago Apple’s stock depreciated from $600 down to $570 per share. The major reason for the decline was the quarterly income report, which came out worse than expected. Some experts say that the next quarterly report may show negative dynamics as well, which will affect the price of the stock. Therefore, recommends waiting for a decline down to $520-500 prior to purchasing the stock.
Secret of Apple’s Victories
The secret behind Apple’s success is wise and efficient marketing and PR, thanks to which the company managed t promote its brand, Eugene Olkhovsky says. It is not just about products. It is about the brand, which has become an attribute of modern life.
Therefore, Gazprom yields to Apple ($158 bn against $600 bn) mainly because it lacks positive PR and image. While apple is known for its innovation products and positive image, Gazprom is mainly known for endless trials and disputes over natural gas prices.
Another objective reason is that the 21st century is the age of technology and innovation. Therefore, tech companies are always in focus.
Strange as it may seem, but today people value technology and innovation more than oil and gas.
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