Apple and Google Have Some LESSONS for Tech Companies

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The technology sector has been on a tear this year, with the Technology Select Sector ETF (NYSEARCA:XLK) surging over 20 percent. Meanwhile, the Nasdaq has outperformed the other major indices by gaining 18 percent. However, this does not mean an investor can simply throw a dart and pick a winner. The line between good tech and bad tech is becoming more evident by the day.

On Friday, shares of Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) both reached new highs as they proved to be the true leaders in technology. Apple climbed to a new all-time high above $648.19 per share after a positive research note from Jefferies. Analyst Peter Misek believes a smaller iPad may go on sale by October and a new television product could become available by 2013.

“We believe Hon Hai is the main manufacturer for the iPad mini,” explained Misek in his report. Misek added that Hon Hai, which is Apple’s largest manufacturer, had seen its revenue increase 5 percent in July from the previous month, even though sales are typically little changed at this time of year. Misek also cited other recent data from Sharp and “other specialty chemical and TV component suppliers.” He continued, “We believe the iTV is in full production.” Misek reiterated his Buy rating on the stock and raised his price target to $900 from $800, estimating Apple will make 25 million iPad devices of all kinds in the current quarter, up from a previous estimate of 16 million.

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Google shareholders have enjoyed a silent, but strong rally. Over the past month, shares in the search engine king have surged over 17 percent as investors realize its business model includes proven monetization methods. On Friday, shares reached a new multi-year high of $677.25. Google has been in a bidding war with Apple over Kodak patents, and continues to attract heavy Internet traffic. Google sites that are driven mostly by video viewing at YouTube.com, were ranked as the top online video content property in July with 157 million unique viewers. Apple has the clear advantage when it comes to hardware, but Google’s information database across the Internet is unparalleled.

Despite the hype seen earlier this year, social media names have been one of the biggest disappointments in history. Facebook (NASDAQ:FB) and Groupon (NASDAQ:GRPN) both reached new all-time lows on Friday. The Zuckerberg-led company has come under new pressure as the first IPO lockup agreement recently expired and brought 271.1 million more shares to the market for trading. On November 14, more than 1.2 billion shares will be available for trading and another 149.4 million shares a month later. The final round of lockup expiration does not occur until May 2013, when 47.3 million shares are set free from the sinking ship.

Meanwhile, Groupon received a too little too late downgrade from Evercore. The firm raised growth concerns and placed a $3 price target on shares. A successful reach of this target would also place shares on par with Zynga (NASDAQ:ZNGA), which has plummeted nearly 70 percent year-to-date.

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