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 $88 billion in gross profits over the last 12 months, and recently unveiling a $100 billion stock buyback plan to flex its financial muscle and lure more investors.
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, it will need to create something new to really excite consumers (and investors) again.
The problems with Amazon have more to do with the stock itself—namely, its rich value. AMZN stock currently has a P/E of 151, more than seven 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 137
Forward P/Es: AAPL 15, AMZN 68
Latest earnings growth: AAPL 32.1%, AMZN 1,186%
Latest sales growth: AAPL 17.3%, AMZN 39.3%
Cash per share: AAPL $14.69, AMZN $55.46
Institutional ownership: AAPL 61%, AMZN 58%
On current and future value, AAPL clearly has AMZN beat. However, Amazon is growing sales and earnings at a far faster rate, and has much more cash on a per-share basis despite having less than half the total cash Apple holds (prior to Apple’s new buyback plan taking full effect, that is). And the two stocks are similarly popular among hedge funds, though AAPL stock’s institutional ownership is a bit higher at 61%.
How to break the tie? AAPL stock looks better from a technical perspective. After getting knocked back 13% during the February and March market correction, the stock recovered all of its losses and traded as high as 232 earlier this month, an all-time high. The stock has pulled back again in the midst of this second 2018 market correction, but at 217 as of this writing it still isn’t far off its 232 peak, and is trading right around its 50-day moving average.
AMZN stock, meanwhile, has fallen more sharply, losing more than 300 points from its early-September peak above 2,000, currently trading in the mid-1,700s after a mild recovery. While still comfortably above its 200-day moving average, AMZN dipped below its 50-day average earlier this month and is still well below that line. Thus, the short-term edge to AAPL.
From a value perspective, AAPL is also the more attractive deal. But here’s the thing: Amazon’s valuation has been a concern for years with no real repercussions. AMZN stock has traded at more than 100 times earnings since 2011. Despite the perennially lofty valuation, pullbacks like the current one 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 growth.
AMZN Has More Upside Potential
And since we’re talking about growth, I’d go with Amazon stock. It has more than doubled the return in AAPL over the last five years, is growing sales at a higher rate and is expected to outpace Apple in earnings growth by almost a four-to-one margin this year. AAPL looks better from a short-term perspective. But these are not short-term stocks; they’re wealth-building investments that should remain viable for years. Both Amazon and Apple are great companies. But if you had to choose just one for your long-term portfolio, I’d still go with AMZN, despite the recent turbulence.
For a bigger list of momentum stocks, 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 this week.
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.