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Better Long-Term Buy: Amazon (AMZN) vs. Apple (AAPL) Stock

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Shares of Amazon (AMZN - Free Report) and Apple (AAPL - Free Report) have both climbed nearly 30% in 2019. Both firms also face slowing growth, which has prompted them to focus on new revenue streams and expansion.

Recent Apple Overview

Apple is coming off a second quarter of fiscal 2019 that saw its adjusted earnings fall 10%, with revenue down 5.1%. This top-line decline marked a larger fall than Q’s 4.5% decline that represented the start of what could be a rough period for Tim Cook’s firm. Sales of Apple’s flagship smartphone tumbled 17.3%, with revenue in Greater China down 21.5%.

Apple anticipated its iPhone slowdown and has tried to shift the focus from the product that turned it into a behemoth toward its growing Services business. This unit’s revenue, which features quickly-growing Spotify SPOT competitor Apple Music, popped 16.2% to account for nearly 20% of total sales. With that said, Services growth came in below Q1’s 19 expansion.

Recent Amazon Overview  

Amazon’s first quarter fiscal 2019 revenue climb 17% to nearly $60 billion. The top-line number might be massive, but last quarter marked a downturn from Q4’s 20% expansion, which was already down big compared to Q3 2018’s 29% climb, Q2’s 39% surge, and Q1’s 43% jump. In fact, last quarter marked Amazon’s smallest top-line expansion since 2015.

Like Apple, Jeff Bezos’ company has known that its days of insane top-line growth likely couldn’t last forever. This is why Amazon has counited to expand into new areas such a logistics and brick-and-mortar stores in order to further challenge Walmart (WMT - Free Report) , Target (TGT - Free Report) , and Kroger (KR - Free Report) .

Price Movement Chart



As we mentioned at the top, shares of Amazon and Apple have both climbed nearly 30% this year, with their comebacks largely based on their late-2018 selloffs. Still, AAPL stock closed regular trading at $202.86 per share on Tuesday, down 13% from its 52-week highs, thanks in part to the recent trade war-induced pullback. Likewise, AMZN stock fell 1.51% to close at $1,921 per share, roughly 6% off its 12-month highs.

AAPL Outlook

Looking ahead, Apple and Wall Street have placed a lot of hope in the continued growth of its Services business. The tech powerhouse is set to try to find new ways to monetize its 1.4 billion active devices. This expansion includes its long-awaited streaming TV platform that Apple hopes can compete alongside Amazon Prime, Netflix (NFLX - Free Report) , Hulu, and Disney (DIS - Free Report) .

Apple also showed off at a March 25 event its $9.99 per month magazine-heavy news service, a new Apple credit card in partnership with Goldman Sachs (GS - Free Report) , and a subscription-based gaming offering called Apple Arcade. On top of that, Apple has somewhat quietly spent $721 million on acquisitions over the last year, which is about twice the amount it spent in 2016 and 2017.

These new Services offerings still don’t look like they will be able to make up for the expected decline in iPhone sales. Our current Zacks Conesus Estimates call for Apple’s adjusted full-year earnings to slip 3.6% on the back of a 3.3% revenue decline. Peeking further ahead, Apple’s 2020 revenue is projected to climb nearly 4% above our 2019 estimate to place it just above its 2018 total.

AMZN Outlook

Amazon’s high-margin AWS cloud computing business helped propel the stock when the company began reporting its metrics earlier this decade. Today, AWS controls the largest portion of the cloud computing market share, ahead of rivals Microsoft (MSFT - Free Report) , IBM (IBM - Free Report) , and Google (GOOGL - Free Report) . Along with its AWS business, the company recently announced its plans to cut down the standard delivery times for its $119-a year Prime memberships from two days to one.

It is important to note that Amazon will continue to offer members the ability to pay for same-day and Prime Now options. Furthermore, the company’s growing e-commerce business has helped it become the third-largest digital advertiser in the U.S., behind only Google and Facebook (FB - Free Report) .  

With this in mind, Amazon’s adjusted full-year 2019 earnings are projected to pop 32% on the back of roughly 18% revenue growth. Meanwhile, the company’s fiscal 2020 EPS figure is expected to come in 44% above our current-year estimate, with sales projected to jump nearly 18% higher than 2019.



Bottom Line

Both firms are tech titans that look set to run strong businesses for years, if not decades, to come. Amazon and Apple are both currently Zacks Rank #3 (Hold) stocks based on their mixed earnings estimate revision activity. The chart above also shows us that Amazon and Apple’s forward price/sales ratios are relatively comparable at the moment. But there are obvious differences.

Amazon looks poised to see its top-line slow down compared to its recent stellar performances. With that said, AMZN seems like a growth stock at the moment that hopes to shake up more businesses and industries. On the other hand, Apple pays a dividend and is trading at 17X forward 12-month Zacks Consensus EPS estimates, which marks a massive discount compared to Amazon’s 64X.

Therefore, Amazon might be the stable growth stock some investors are looking for, especially when coupled with its expected earnings improvement. Meanwhile, Apple offers investors the chance to stay exposed to a company that has a history of introducing industry-changing products, while collecting a solid dividend—not to mention the potential for massive buybacks.

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