Comparing Saudi Aramco and Apple: A Tale of Two Companies

The question of whether Saudi Aramco or Apple is the better company is a classic example of comparing apples and oranges—literally and metaphorically. While both companies are global giants with significant market influence, their core businesses and market dynamics are as different as chalk and cheese. Let's delve into why these two companies cannot be fairly compared and what each stands for in today's global economy.

Core Business and Market Influence

Saudi Aramco is the world's largest oil and gas company. Its primary business is the exploration, production, refining, transportation, and marketing of crude oil and petroleum. As of 2022, it controls over 60% of the global crude oil output. This gives Aramco immense geopolitical power, allowing it to significantly influence global oil prices and supply dynamics.

On the other hand, Apple is a multinational technology company that designs, manufactures, and sells consumer electronics. Apple is renowned for its innovation in the consumer electronics sector, particularly in personal computers, smartphones, and smartwatches. The tech giant also ventured into other areas such as music, entertainment, and software development, which are a far cry from the oil and gas industry.

Market Dynamics and IPO Considerations

IPO Challenges for Saudi Aramco: As the world's largest entity by market capitalization before its IPO in 2019, Saudi Aramco faced considerable scrutiny regarding its valuation. The company listed only about 5% of its shares, which raised questions about its high IPO price. Critics argue that the remaining shares would be subject to the whims of Saudi Arabia's political and economic decisions, making them unreliable for investors.

Investors and analysts predict that the actual value of Saudi Aramco's oil reserves is significantly lower than the price at which they were listed. This discrepancy is mainly due to things like high extraction costs, environmental concerns, and the impending rise of alternative energy sources. Hence, even if the IPO price was initially set higher, the valuation might not withstand the test of time.

Apple's Stable Growth: Conversely, Apple continues to grow steadily, driven by its innovative products and robust brand loyalty. Despite facing periodic economic downturns, Apple has managed to maintain a consistent growth trajectory through its diverse product lines and strong customer base. The tech industry, while subject to rapid changes, has generally been more predictable compared to the volatile oil and gas sector.

Conclusion: Suitability for Shareholders

Impact on Shareholders: Saudi Aramco’s investors are heavily reliant on Saudi Arabia's political and economic stability. Given the country's unique geopolitical position, there is a risk that Aramco's future could be influenced by factors outside the control of its shareholders. This makes it a less attractive option for investors who prefer transparency and stable returns.

Apple, however, offers a different suite of benefits. Its business model involves consistent innovation and diversification across multiple product lines. Additionally, Apple has a proven track record of delivering value to its shareholders through steady profits, dividends, and stock buybacks. Moreover, Apple's diversification in the tech industry provides a buffer against market fluctuations that could be detrimental to those reliant on oil and gas.

Final Thoughts: Whether Saudi Aramco or Apple is the better company ultimately depends on the kind of investment you are seeking. If you are looking for exposure to a company that has a significant geopolitical influence, Saudi Aramco might be worth a bet. However, for those who want a more stable and diversified investment with proven returns, Apple remains a safer and more appealing choice.