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, and with both companies about to take center stage this holiday shopping season, 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 $98 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+ streaming service, launched earlier this month, looks like a nice start, though launching a streaming service isn’t exactly a novel idea. And it appears to already be lagging behind Disney’s (DIS) new (and higher-priced) Disney+ streaming service.
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 78, 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 22, AMZN 78
Forward P/Es: AAPL 17, AMZN 65
Latest earnings growth: AAPL -3.1%, AMZN -23%
Latest sales growth: AAPL 1.8%, AMZN 23.7%
Cash per share: AAPL $22.63, AMZN $87.54
Institutional ownership: AAPL 61%, AMZN 57%
On current and future value, AAPL clearly has AMZN beat. And that earnings slippage for Amazon last quarter was ugly, though the trend of Apple’s earnings is more troubling – this was the third straight quarter in which AAPL’s EPS decline. Also, Amazon is growing sales 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. 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, Apple stock looks much better, up 31% in the last three months and trending higher with almost no interruption since early August. It’s up more than 70% year to date.
Amazon stock, meanwhile, has been running in place, up a mere 1% in that same span and trading well below its July peak. AMZN’s year-to-date performance (+19%) trails the market’s.
AAPL Stock is the Winner
So in the battle of Apple vs. Amazon stock, I’m giving AAPL the nod here. It has far more momentum, a more reasonable valuation, and the Apple TV+ launch is a nice new revenue stream. Don’t get me wrong – I think both stocks will be up considerably in the coming years, and either would make a strong addition to your portfolio if you’re one of the few who doesn’t already own at least one of them. But, for now, AAPL stock is the better bet, despite the recent EPS downturn.
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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.