In the following video, Motley Fool financial editor Brenton Flynn discusses his reason for owning shares of online retailer Amazon.com and staying on the sidelines with Apple. By traditional valuation metrics, owning Amazon, whose P/E ratio is 180, seems insane when compared Apple, which comes in at a mere 15. However, Brenton sees Amazon as a much more compelling long-term story than Apple, which will have to continually innovate each and every year to stay relevant in the rapidly evolving consumer-electronics industry. Follow along for a summary of Brenton's logic, and feel free to criticize him in the comments section!
If you're a tech investor, the amount of Apple stock in your portfolio has been a key factor in whether you've been stomping the market in recent years. However, with the company preparing its most important phone launch in history with the iPhone 5 and looking at a game-changing television, the stakes have never been higher for Apple. If you're looking for how to play Apple in the coming months, The Motley Fool has created a brand new report listing not only the opportunities facing Apple, but also what to look for to know when to sell. The report not only comes with a write-up from one of our top analysts but also includes continuing updates whenever news strikes the company. Click here to get started today!
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Report this Comment On July 23, 2012, at 4:26 AM, st0815 wrote:
Apple is the master of lock-in. Once you are in the Apple ecosystem you continually contribute to Apple's coffers, via app purchases and via content. Once your investment in apps and content is high enough, switching becomes an unattractive proposition. You are much more likely to stay in there and buy more Apple devices.
Sure, they are still a hi-tech company, and that means they are continually forced to innovate. That applies to Amazon as well, though. They find themselves having to compete in the eReader space, they are getting pressure from Google in the hosting area, and once the business focuses on electronic media - both Google Play Store and Apple iTunes are strong competitors.
Report this Comment On July 23, 2012, at 4:30 AM, Bullishcross wrote:
'Why I own Amazon at a 90 P/E and not Apple at a 10 P/E." Answer: Because I'm a fracking idiot.
Report this Comment On July 23, 2012, at 4:43 AM, dynazor wrote:
"Why I Own Amazon, and Not Apple"
Because you're a dick?
Report this Comment On July 23, 2012, at 5:28 AM, oriorda wrote:
Guys... the fellow has a point. If he buys a gazillion of Amazon when it's making losses on major product lines and a margin of 1 - 2% overall... well, he can make it up on volume. Just like Amazon.
Report this Comment On July 23, 2012, at 5:42 AM, hugo4 wrote:
Sure, Amazon is a nice company and I use them to buy books, DVDs and other stuff, but I also use a lot of other companies to buy goods. When it comes to electronics, I am typing this on my 5th Mac, my 5th iPod (touch) is sitting next to it, and I recently bought my second Apple tv. I play music from my Mac to my stereo through Airtunes, I also use iTunes to buy music and apps. I spend a lot of money with or through Apple, but I think it is worth it. I still use the Apple products that I have replaced, three generations back. My wife uses my previous Mac, my mother uses the one before that, and she is happy with it, although it is 8 years old already. My older iPods are being used in the kitchen and in the car. If you look at how many people want or have Apple products, I cannot see Apple's rise come to a halt very soon. There is still a lot of market share te be gained, and of course Apple will come up with new things as well. Television content, cars, mobile gear, these are all growth markets.
Report this Comment On July 23, 2012, at 5:51 AM, hugo4 wrote:
I forgot to mention the two iPads that we have...they are really great! When I see how many friends recently replaced their PCs, Nokias and Blackberries with Apple products, and how many of them are now using the iPad... it is hard to imagine Apple growing by 50% this year and next year again, but it will probably happen. The Chinese market is huge, the iPad can replace a lot of PCs for basic tasks. Cheaper iPhones will take more market share. As Steve Jobs once said: If I can fulfill all your needs I will get all of your money...
Report this Comment On July 23, 2012, at 2:32 PM, Seanickson wrote:
I like Amazon, and may even consider buying it at 1-1.5 times sales but I don't think they can maintain 6% operating margins. There is no greater price competition than on the internet and I dont see enough that differentiates amazon from its competitors. I think a 4-4.5% operating margin as sustainable without taking much from its growth.
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