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 149, nearly eight 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 18, AMZN 149
Forward P/Es: AAPL 15, AMZN 74
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 62%, 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 62%.
How to break the tie? AAPL stock looks slightly better from a technical perspective. After getting knocked back 13% during the February market correction, the stock has recovered all of its losses and is now trading at new all-time highs above 208 following a post-earnings gap up in late July.
AMZN stock, meanwhile, has also fully recovered from a rough patch in March after Donald Trump accused Jeff Bezos’ company of (among other things) scamming the U.S. Postal Service out of money due to low shipping costs. In the four days that followed the President’s remark, Amazon shares tumbled nearly 13%. The stock recovered quickly, though, zooming to new all-time highs in July. Earlier this week it was at fresh highs above 1,900, but tumbled to 1,887 in Wednesday trading.
Both stocks have some momentum, despite recent mini-slides. From a value perspective, AAPL is 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. While it currently trades at more than twice that, the escalating valuation has done little to scare investors off over the years.
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. Plus, the valuation has yet to scare investors off – and actually it’s not nearly as overvalued as it used to be.
AAPL is less likely to go permanently in the tank if the market turns sour again due to the huge valuation disparity. It’s also the more mature company, with a much more consistent history of earnings growth. And the new buyback plan should help.
But Amazon stock is more likely to double its nearly $1,900 price tag in the coming 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.
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.
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*This post has been updated from an original version.