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 $105 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.
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 critical production lines in China playing catch-up after being shuttered due to the global coronavirus outbreak – it will need to create something new to really excite consumers (and investors) again. The Apple TV+ streaming service, launched a little over a year 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.
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 92, more than twice 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 39, AMZN 92
Forward P/Es: AAPL 32, AMZN 59
Latest earnings growth: AAPL -7.4%, AMZN 196.7%
Latest sales growth: AAPL 1%, AMZN 37.4%
Cash per share: AAPL $5.35, AMZN $136.33
Institutional ownership: AAPL 59%, AMZN 58%
On current and future value, AAPL clearly has AMZN beat. But Amazon has Apple beat in every other area: growth is accelerating, with earnings basically tripling in the latest reported quarter (neither company reports fourth-quarter 2020 earnings until later this month); Amazon has much more cash on a per-share basis despite having much less total cash than Apple. And the two stocks are similarly popular among hedge funds.
Now for the million dollar question: which company is likely to be hurt more by the coronavirus pandemic and recession going forward? The easy answer is Apple. The supply chain problems in China and elsewhere are very real, and the impact on retail sales are still being felt, hence the modest growth numbers in the most recent quarter.
Amazon, on the other hand, is one of the few companies benefitting from coronavirus. That’s what happens when you’re the largest e-commerce company in the world, and most of the world has to do its shopping online. The company added 100,000 full- and part-time jobs to keep up with the demand, and, for a time at least, paid employees in warehouse and distribution roles $2 per hour extra.
And despite a brief slip, Amazon stock has been immune to the virus, touching as high as 3,500 a share (!) in September before pulling back below 3,000 amid the early-fall market collapse. In the last year, AMZN is up 69%, versus a 41.7% gain in the Nasdaq. Apple stock has nearly matched AMZN, also easily outperforming the Nasdaq with a 65% one-year return. That small disparity, and just the practicalities of Amazon’s business being pandemic-friendly, and Apple’s not, is enough to give AMZN the nod in the battle of Apple vs. Amazon stock.
AMZN Stock is the Winner
It’s true that 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 even before the coronavirus. Now that it’s held up better during it, and given the nature of its business, Amazon looks like the better buy for the year to come.
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.