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Better stock to buy: Apple vs. Amazon

Better stock to buy: Apple vs. Amazon
Kliment Dukovski

Apple and Amazon are tech giants part of the FAANG group of stocks. They both outperformed the S&P 500 this year, returning 40% and 64%, respectively, to investors.

But which out of these two stocks is a better pick?

Apple stock

Apple (NASDAQ: AAPL) is a tech company that designs and builds smartphones, tablets, personal computers, wearables and more. Its most popular product, the iPhone, has a 57% market share in the US and 15% globally.

The company revealed its new iPhone 15 product line as well as new wearables on September 12. But investors weren’t excited. Apple’s stock price was down 1.7% a day after the launch.

Tom Forte, an analyst for D.A. Davidson, said, “Unlike years past, we believe the company may not be able to rely on strong iPhone sales to drive its share price higher.” Regardless, Forte reiterated his price target of $180.

Since the company failed to raise prices on its iPhones, except for the iPhone Pro Max, which got a $100 increase, investors are worried that this will impact revenue going forward.

Evercore ISI analysts said, “Investors were hoping to see a $100 bump to the cost of the Pro, which would’ve helped offset any potential headwinds from Huawei’s Mate 60 Pro Launch.” Evercore ISI still has a price target of $210.

One day after the event, though, China warned of security issues with the iPhones. This comes one week after China banned government officials from using iPhones. 

Despite that, Apple boasts a profit margin of around 25% and it offers other Apple services, including Apple TV, App Store, Apple Pay, and Apple Card.

Meanwhile, analysts are seeing an average price increase of 17% to $207 in the next 12 months.

TipRanks analyst price target. Source: Interactive Brokers Fundamentals Explorer

Amazon stock

Amazon (NASDAQ: AMZN) is an e-commerce tech company that offers multiple products and services, including electronic devices such as Kindle, Fire TV, Echo, and Ring, and it produces media content via Amazon Prime. Another huge part of the company is the Amazon Web Services (AWS) segment, which consists of global sales of computing, storage, database, and other services to businesses.

In its most recent quarter, Amazon reported sales of $134 billion. That’s 30% more than Apple’s $81 billion. However, Amazon’s operating income was $7 billion, way less than Apple’s operating income of $22 billion. This shows that Apple can generate higher operating income with less sales.

TipRanks analysts give a 24% higher price target in the next 12 months from $141 price per share today.

TipRanks analyst price target. Source: Interactive Brokers Fundamentals Explorer

Analyst projections make Amazon seem like the better bet with a price target 24% higher than the current market price, compared to Apple’s 17% price target for the next 12 months.

However, Amazon currently has a trailing price-to-earnings ratio of 110, while Apple has 30, which could make the first seem overpriced.

Regardless, both these companies have high cash reserves, are profitable, and are a valuable addition to anyone’s portfolio.

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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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