Alphabet set to reign over Apple for good

Published Thu, May 12 20164:55 PM EDTUpdated Thu, May 12 20164:56 PM EDT

Alphabet passed Apple in market capitalization Thursday to become the world's most valuable publicly traded company, a feat it accomplished once before this year before retreating back to the No. 2 spot. The early take from experts is that it is only a matter time before the internet conglomerate takes over the title for good. The Google parent overtook the iPhone seller for a single day in early February before Apple made a comeback the very next trading day. Apple initially surpassed Exxon Mobil as the largest company in 2012. The two companies jockeyed back and forth a few times during 2013 until the tech juggernaut pulled away from the pack ... until now. This year, Apple shares have cratered by 14 percent, more than double the loss for Alphabet's stock, on concerns that the new iPhone 7 will fail to reignite sales growth. That worry was specifically behind the drop Thursday in Apple. Alphabet closed Thursday worth $494.9 billion, topping Apple's $494.8 billion market cap. Last year, when all the talk was about whether a surging Apple would one day be the first public stock with a $1 trillion market capitalization, BGC Partners' Colin Gillis took a contrarian stance. He told CNBC Pro in September that Alphabet's software-centric model was a better long-term bet than Apple's reliance on hardware and that the Google parent would hit $1 trillion first. "When you look out at Alphabet's road map, the number of services with over a billion users and the recurring revenue, it is a more sustainable business model than Apple's model of relying on selling devices," Gillis said Thursday after Alphabet slid into the No. 1 spot once again. "One year from the now, barring government intervention, the market cap gap (Alphabet over Apple) could be even wider." The numbers seem to back the analyst's thesis. Google will capture $47.6 billion in search ad revenue in 2016, representing 55.2 percent of the search ad market worldwide, according to eMarketer. And the search company's ad revenue grew 16 percent year over year in the March 2016 quarter. On the flip side, Apple reported iPhone unit sales declined 16 percent year over year in the same quarter. Read More The $100 million short case against Dish Network While most analysts besides Gillis are still bullish on Apple on paper, reading between the lines shows that many have already given up on the stock for 2016 as they get more pessimistic about the next iPhone. "We have revamped our iPhone forecast model, the heart of which is our installed base model. Upgrades to the iPhone 6 have been disappointing with an apparent lengthening of the upgrade cycle," UBS' Steven Milunovich wrote in a note to clients Wednesday. He added on CNBC's "Halftime Report " on Thursday, "Nobody believes the (iPhone) 7 will have tremendous new features to make people go out to buy a new phone." More ominous is the last missive from the person some call the best Apple analyst on the planet, Ming-Chi Kuo of KGI Securities. Kuo was one of the few forecasters to get the positive iPhone 6 and negative iPhone 6S cycle calls correct. And Kuo is not optimistic on the upcoming iPhone 7 either. He said it will not have "many attractive selling points" and predicted Apple will be the only top-five smartphone maker to decline this year, according to AppleInsider . Read More Kensho Stats: Investing with gloomy billionaires A look at the Apple chart suggests there won't be another run at Alphabet soon as well. "Apple has broken $92 support this morning, which represents its February 11th and August 2015 lows," Asbury Research's chief market strategist, John Kosar, wrote in an email. "The next two significant support levels are situated 6 percent and 9 percent below the market at the $84.77 March 2009 uptrend line and the $82.19 December 2013 benchmark high. Considering the importance of $92.00 support which is currently being broken, a potentially quick, deeper decline to test these levels appears reasonable if not likely." To be sure, there were some on Wall Street recommending stepping up here and buying the stock. Apple shares are down this week on a Nikkei report saying second-half 2016 build plans from a key iPhone supplier are likely to fall to 70 to 80 percent of 2015's level. "The stock has reacted negatively to this (Nikkei) news, down about 3 percent, which we believe is an exaggeration as this was largely understood and included in our estimates already," Credit Suisse's Kulbinder Garcha wrote in a note to clients Thursday. Still, even if one is long-term bullish on Apple versus Alphabet, this week doesn't look like the time to make that bet, according to most investors and analysts. Apple's "break of $92 looks important and negative technically, likely leading to a test of support near $85," said Mark Newton of Newton Advisors. The stock "remains technically negative in the short run, as part of a longer-term bullish uptrend from 2009." — With reporting by CNBC's Christopher Hayes and Michael Bloom

Google CEO Sundar Pichai

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The Google parent overtook the iPhone seller for a single day in early February before Apple made a comeback the very next trading day. Apple initially surpassed Exxon Mobil as the largest company in 2012. The two companies jockeyed back and forth a few times during 2013 until the tech juggernaut pulled away from the pack ... until now.

This year, Apple shares have cratered by 14 percent, more than double the loss for Alphabet's stock, on concerns that the new iPhone 7 will fail to reignite sales growth. That worry was specifically behind the drop Thursday in Apple.

Alphabet closed Thursday worth $494.9 billion, topping Apple's $494.8 billion market cap.