Amazon (AMZN) and Alphabet (GOOG) are two of the world’s most recognizable brands and Wall Street’s most coveted stocks, and the long-term trajectory of each blue-chip stock is still decidedly up. Plus, it’s estimated that roughly 40% of all web traffic is hosted by those two companies combined. But which looks like the better buy today, AMZN stock or GOOG stock?
Both stocks were beaten down by the growth stock sell-off of 2022 but have bounced back impressively since. GOOG has risen 81% since the start of 2023 vs. AMZN’s 110% gain. Over the last five years, GOOG is up 167% vs. a 92% gain in AMZN.
Those are particularly strong returns for GOOG, especially when compared to the 87% return in the S&P 500 in the last five years. Now the question is: Can AMZN and GOOG repeat or beat that performance over the next five years?
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It would be foolish to doubt either company at this point. That said, no stock continues to grow at a breakneck pace forever. Just ask anyone who bought General Electric (GE) 20 years ago, when it ranked among the 10 largest companies in the world by market cap. (Its 20-year returns just flipped positive this summer.) So chances are, one or both of these blue-chip tech stocks will start to slow in the years ahead.
Given that backdrop, I thought it might be a fun exercise to examine which tech giant stock is better positioned for future growth.
Here’s a closer look at AMZN stock and GOOG stock, broken into a few key numbers:
Tale of the Tape: AMZN Stock vs. GOOG Stock
Trailing P/Es: AMZN 42, GOOG 23
Forward P/Es: AMZN 39, GOOG 22
Estimated 2024 revenue growth: AMZN 10.5%, GOOG 13.0%
Estimated 2024 EPS growth: AMZN 63.1%, GOOG 32.1%
Cash per share: AMZN $8.49, GOOG $8.18
Institutional ownership: AMZN 64%, GOOG 62%
That comparison tells us that AMZN is still the more overvalued stock. However, until recently it had been the faster-growing company on both the top and bottom lines; and it had been since 2016. That was also the year Amazon first turned consistently profitable.
That said, Google has a touch more cash on hand (about $11 billion), with roughly a fifth as much debt. Considering that Amazon brings in nearly twice as much revenue as Google annually (though that gap is closing), that means that Amazon has been way more willing to spend its cash on things that will grow the company - the Amazon Prime Video streaming service that is rivaling Netflix these days; a new foray into live sports with NFL broadcasts; the Amazon Echo, Amazon Web Services, etc. Google looks more like a cash hoarder. The result is that Amazon stock has grown much faster than GOOG stock in the last decade, though that has certainly changed in the last few years.
The guess here is that Google will start loosening its purse strings in the coming years, devoting it to new, exciting products, or perhaps Google will join Amazon, Netflix, Apple and Disney in the big-money streaming video wars (YouTube did make a splash buying the NFL broadcast rights). Regardless of what it comes up with, bet on Google spending more of its $100 billion cash stockpile soon. If it does, that could capture investors’ attention the way Amazon did up until the last few years.
GOOG Has More Upside Potential
You can’t go wrong with either of these growth stocks. If you bought both of them five, 10 or even 15 years ago, you’ve made a LOT of money. But AMZN has been the better performer, at least up until recently. I think that might change in the years to come. Between its cash stockpile, untapped potential revenue streams, and cheaper valuation, I like GOOG stock to outperform AMZN in the next five years. In fact, that shift already seems to be taking place, as the last few years have shown. It could be the start of a longer-term role reversal between two of the biggest, baddest tech stocks on the block.
Given the state of the current bull market, you could buy both (or either, although I prefer GOOG); either way, an investment in GOOG stock will likely turn out quite well five years from now.
For a list of the stocks that have the strongest momentum to start the year, consider taking a trial subscription to Cabot Top Ten Trader. In it, you’ll find the list of 10 stocks that are set to jump next week.
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*This article is periodically updated to reflect market conditions
