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 $101 billion in gross profits over the last 12 months, and is in the midst of a $100 billion stock buyback plan in an effort to flex its financial muscle and lure more investors.
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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.
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 – and perhaps on the brink of cratering – it will need to create something new to really excite consumers (and investors) again. The new Apple TV Plus streaming service, due out in November, looks like a nice start, though launching a streaming service isn’t exactly a novel idea.
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 71, more than three times 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 19, AMZN 71
Forward P/Es: AAPL 17, AMZN 52
Latest earnings growth: AAPL -12.8%, AMZN 3.6%
Latest sales growth: AAPL 1.0%, AMZN 19.9%
Cash per share: AAPL $20.94, AMZN $83.82
Institutional ownership: AAPL 61%, AMZN 57%
On current and future value, AAPL clearly has AMZN beat. However, Amazon is growing sales and earnings at a far faster rate (Apple, in fact, didn’t grow either in its last two quarters), and has much more cash on a per-share basis despite having less than half the total cash Apple holds. And the two stocks are similarly popular among hedge funds, though AAPL stock’s institutional ownership is a bit higher at 61%.
From a technical perspective, the stocks look a lot alike, with some recent wobbles coming on the heels of some big gains in the first half of the year. AAPL is having the better year, up 43% year to date, versus a mere 12% gain in Amazon stock. AAPL stock has more momentum, but not enough to supersede the serious red flags in Apple’s sales and earnings trajectories.
Which is why I give Amazon stock the nod here, despite its recent wobbles. Yes, from a value perspective, AAPL is the more attractive, buy-low play. But here’s the thing: Amazon’s valuation has been a concern for years with no real repercussions. Until recently, AMZN stock had traded at more than 100 times earnings since 2011. (The 71 P/E now is the cheapest it’s been in years!) Despite the perennially lofty valuation, pullbacks like the one in the last few weeks have been rare.
In the end, it comes down to personal preference. If you’re a value stock investor, AAPL probably looks like the safer buy. If you’re a growth investor, Amazon’s long-term chart looks mighty appetizing, as does its sales and earnings growth.
AMZN Has More Upside Potential
And since we’re talking about growth, I’d go with Amazon stock. Even with the weaker performance in 2019, it has more than quadrupled the return in AAPL over the last five years, and is not only still growing (unlike Apple last quarter), but growing the top line at a pace that would make some small-cap stocks envious.
Both Amazon and Apple are great companies. But if you had to choose just one for your long-term portfolio, I’d go with AMZN.
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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.