Apple and Amazon May Already Be in Your Portfolio. But Which Has the Better Long-Term Upside?
Apple (AAPL) and Amazon (AMZN), two of Wall Street’s true heavyweights, have long been mainstays of many investors’ portfolios. Even the lay investor knows that, which is why they’re perhaps the two stocks my investing-agnostic friends and family members most frequently ask me about. Specifically, what they ask is: which is the better long-term investment going forward? With that in mind, I thought it might be useful to break it down with an Apple vs. Amazon stock tale of the tape.
There’s a lot to like about both companies, of course.
Apple remains a cash cow, generating $152 billion in gross profits over the last 12 months, and is at the tail end of a $480 billion stock buyback plan in an effort to flex its financial muscle and lure more investors (hint: it’s working!).
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Amazon, meanwhile, is arguably the most diversified company in America, having revolutionized the way people shop, launched a video streaming service that rivals Netflix (NFLX), created a profitable cloud computing wing, etc. (all for the purpose of sending founder Jeff Bezos to space, apparently…but that’s another story!).
But there are nits to pick about each company.
Apple has become something of a one-trick pony under Tim Cook, churning out a seemingly endless line of iPhones but failing to innovate the way it did under the late Steve Jobs. With iPhone sales sagging, it will need to create something new to really excite consumers (and investors) again. The Apple TV+ streaming service, launched nearly two years ago, looks like a nice start, though launching a streaming service isn’t exactly a novel idea (though it was quite well-timed for this era of social distancing and self-isolating). And it’s clearly lagging behind Disney’s (DIS) new (and higher-priced) Disney+ streaming service, despite the success of shows like Ted Lasso and The Morning Show.
The problems with Amazon, meanwhile, have more to do with the stock itself—namely, its rich value. AMZN stock currently has a P/E of 65, well more than double AAPL’s value. That Grand Canyon-sized chasm between the stocks’ valuations is a good place to start when examining the tale of the fundamental tape for Apple vs. Amazon stock.
Here’s a closer look at AAPL and AMZN, broken into a few key numbers:
Tale of the Tape: Apple vs. Amazon Stock
Trailing P/Es: AAPL 31, AMZN 65
Forward P/Es: AAPL 32, AMZN 50
Latest earnings growth: AAPL 62%, AMZN -50%
Latest sales growth: AAPL 28%, AMZN 15.3%
Cash per share: AAPL $4.03, AMZN $155.75
Institutional ownership: AAPL 59%, AMZN 59%
On current and future value, AAPL clearly has AMZN beat, even though AMZN is the cheapest it’s been in years on a price-to-earnings basis. And Apple’s sales and earnings accelerated at a faster pace in the latest reported quarter, mostly because Amazon’s never dipped during the pandemic (in fact, they improved), while Apple struggled with supply-chain shutdowns in China and elsewhere amid lockdowns. But Amazon has infinitely more cash per share despite having a comparable amount of total cash. From a fundamental perspective, that’s basically a push – although Amazon’s 50% earnings dip last quarter was an ugly number, though it mostly stems from being compared to last year’s Covid shutdown business boom. So let’s move to the technical side.
Despite a brief slip, Amazon stock has been immune to the virus, touching as high as 3,731 a share (!) in July before pulling back below 3,200 in August. It has entered a range since, reaching nearly as high as July’s levels in November before correcting down to the bottom of the range to start this year. Apple stock has performed better, returning 36% on a one-year basis and beating the Nasdaq’s 16% return. With both stocks bouncing after brief dips, however, I think Apple stock has more potential in the short term given its more appealing valuation. But over the long haul, I prefer AMZN in the battle of Apple vs. Amazon stock.
AMZN Stock is the Winner
And we’re talking about the long run here, not just the next six to nine months. Both AAPL and AMZN are stocks you’d be wise to hold in your long-term or retirement portfolio. But Amazon stock was growing faster than AAPL before the coronavirus. Now that the pandemic has mercifully slowed and business has returned to something close to normal, I think Amazon still has the more diversified list of offerings, and the stock is close to as cheap as it’s ever been.
If you want to know what other, less obvious growth stocks we’re currently recommending, consider taking a trial subscription to Cabot Top Ten Trader. It’s a weekly list of the market’s 10 best momentum stocks, complete with loss limits and buy ranges.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version, published in 2018.