Apple and Amazon are two of the best tech stocks to own forever.
But if you had a choice between Apple and Amazon stocks and you could only choose one, which would it be? While Apple is currently trading at $115 per share, Amazon is trading at $3,200 per share (both prices in USD).
Okay, let’s put it this way, you had $1,000 to invest today, you could choose Apple stock or Amazon stock, which would it be?
If you just said Apple, I’ll be more than happy to ask you why? Don’t get me wrong, Apple is a great choice, but why did you choose it over Amazon? I just want to know.
And if your choice is Amazon, I also need to know why 🙂 For the same reasons.
Anyway, the topic of today’s discussion is to compare Apple and Amazon stocks (using average user metrics) and decide which one is actually better.
If you already hold these two stocks in your TFSA or RRSP, don’t panic. Both are amazing long haul takes 🙂 I’m a fan of Tim and Jeff 🙂 But, just for this article, I want to pick a clear winner. Now let’s get into the details.
Apple vs. Amazon – Stock Returns and Charts
To better understand how these stocks have performed over the years, let’s start with the annual returns of Apple and Amazon stocks.
Let’s start with Apple’s annual returns.
Apple broth:
Source: 1stock1.com
Apple stock splits over the years:
You also need to take into account the recent split in Apple shares after the massive price hike in July 2020 (4 shares for 1 held). For every share you hold, you get 4 additional shares. So 100 shares became 400 ex-split dates.
Now let’s look at Amazon stock:
Distribution of Amazon shares over the years:
As you can clearly see in the charts above, of the two stocks compared here, Amazon’s annual returns have been a clear winner with consistent double-digit returns over time.
Especially during the pandemic and the stock market crash around March, Amazon (NASDAQ: AMZN) stock actually fell less (compared to other FAANG stocks) and the rebound was even greater. All thanks to people sitting at home and ordering multiple items from Amazon.
Speaking of Apple, Apple’s iPad and Mac also showed significant growth (yes, with iPhones) as well (with people working from home), it wasn’t the same type of quarterly growth that Amazon showed us. Amazon is miles ahead.
Ultimately, whether it’s a pandemic or not, Amazon has a better and consistent growth rate between the two. Additionally, Amazon is extremely diverse, with AWS accounting for only 12% of total revenue.
Growth curve of the two companies in comparison
Amazon Stock:
For comparison here, I just looked at Amazon’s stock chart for the last year.
As you can see around March, during the stock market crash, Amazon’s decline was less compared to other FAANGs or stocks in general. And also look at the recovery of the stock especially after the announcement of the quarterly result (10X EPS growth and explosive quarter).
Apple Stock During the Pandemic and After:
Although Apple stock has performed extremely well this year, during the market crash, the stock hit bottom pretty quickly. But since the quarterly results and stock split were announced, stocks have been on a roller coaster ride, to say the least.
Remember, Amazon didn’t announce any stock splits or bonuses to boost the stock price, but the stock performed extremely well. While for Apple and Tesla, stocks reached new highs after the splits were announced and performed well as well (but not on par with Amazon).
Regardless, both stocks have performed extremely well since the pandemic crash. But I honestly think Amazon is a better pure play here than Apple.
Let’s move on.
Amazon’s growth trajectory
If you have carefully analyzed the quarterly results (Investor Relations page) of these two companies, there is one thing to note.
Preview of Amazon’s recent quarterly report:
This is the latest screenshot of Amazon’s Q2 quarterly results.
A few things to note here compared to Apple or any of the other FAANG stocks:
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Look at the year-over-year net sales growth of 43% in North America and 38% internationally. (Jumps but from 20% to 43% for the 3 month period and from 18% to 36% for the six month period). Note that, even before the pandemic, Amazon was still growing over 20% year-over-year. Amazing!
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Note that Amazon’s net income almost doubled over a three-month period and also increased significantly over a 6-month period.
Amazon net income from 2007 to 2020 (quarterly)
Source: https://www.statista.com/statistics/273963/quarterly-revenue-of-amazoncom/
Just look at the incredible growth rate Amazon has experienced quarter over quarter.
Let’s move on.
Let’s quickly look at Apple now.
When I look at Apple’s income statement/balance sheet, I can immediately note a couple of things:
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Apple is extremely cash rich. The results are fantastic to say the least.
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Apple’s growth rate is quite moderate in terms of product sales. The only reason I find the stock continues to rise is due to the massive buybacks (spending billions), mainstream hype, and the overall image of the company. (Lower price with divisions and brand value in play)
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Q Dividends – Apple pays increasing dividends every year, while Amazon does not pay a cent in dividends. Amazon is a growth machine. Whereas with Apple you can expect decent dividends.
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Apple’s stock split is something to consider. When Apple’s price reaches a certain point, the company has systematically done stock splits (7-for-1 in 2014 and 4-for-1 in July 2020), which appeals to end users like you and me. After the split, the stock price drops further (even though the value remains the same) and more investors join the ship. (How many so called investors will understand the value of investment, they will just look at Apple, the price per share and invest). With Amazon this is not the case, the price is high at $3,200 per share.
As for Apple’s recent earnings report, there’s nothing out of the ordinary to note here other than services revenue growing at a significant rate. One important thing to note is that the reason Apple is extremely insistent on service revenue is operating cost and efficiency. With over a billion active Apple devices worldwide, service revenue is expected to reach $1 trillion by 2025 (projected).
Along with services revenue, Mac and iPad sales also increased due to the pandemic and working from home. This trend will likely continue this quarter and for the rest of the year as people continue to work from home and the pandemic persists for some time. This is good news for Apple shareholders.
Apple stock dividends
If you like to receive juicy and regular dividends, then Apple does a pretty good job good job here.
A few things to note here:
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Apple has increased the dividend percentage every year. This is good news.
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You will receive dividends 4 times a year by owning Apple stock. Although Apple is a pure growth stock in my opinion and dividends are just a namesake. (It’s pennies after all, unless you own around 1000 shares)
The one thing I really like about Apple is that even though it’s ethically wrong, they force people to stick to their so-called “ecosystem” and the products work great over time.
In addition, Apple indirectly puts pressure on people to get used to and adapt to more profitable techniques. For example, with the recent iPhone 12 launch, Apple ditched the charging pad ($20 if you need it), no more earbuds (it’s for pushing AirPods), and the battery drain issue to buy new phones and slow down phones.
Also remember that in the previous generation of phones, Apple ditched the headphone jack and every other company in the world followed (including Samsung and Google).
As an Apple shareholder, all of the above points are extremely positive for you. The more Apple sells, the more your stock earns and so do you (EPS). (Even if it’s wrong to say that)
Apple vs. Amazon Net Income Reports
When you look at Apple’s net profit report from 2005 to the last quarter of 2020, you can see consistent growth in net profit. Revenues have just exceeded 20 billion for the first time in 2020.
When we look at Amazon’s net profit over time, just look at the massive net growth over time.
Prospective actions of Amazon and Apple
Let’s talk about Apple first now.
Apple will certainly do well over the next two quarters. With the launch of the new iPhone 12 and pre-orders looking extremely good around the world (especially in China, where working from home continues), sales of the new iPad Air and iPad should also be doing very well.
As for Amazon, you can expect another explosive quarter, with Prime Day sales increasing and the recovery plan continuing. With people still sitting at home and the holiday season here, expect nothing less for the stock to reach higher levels.
Final words – Apple or Amazon?
Apple and Amazon are two amazing values in the modern world. Holding them both in your portfolio is not only a good thing, but it will be very lucrative in the long term (5-10 years at least).
We can expect the stock price to double again over the next five years, to say the least.
With Apple, we can expect a new split in the coming years. With soaring sales and the pandemic, the stock will only reach higher levels in the years to come. (Don’t forget buybacks when it comes to Apple).
When it comes to Amazon, the company is extremely diverse and experiencing fantastic growth. It’s one of the few gems of the stock market that you can only accumulate and never think about selling. The only downside is the title’s price of entry. A single title costs $3,200 US, or about $5,000 Canadian.
Overall, to conclude, I will personally give the edge to Amazon stock over Apple. I hope I have justified why in this post.
Thanks for reading. Let me know your thoughts and comments below.
