Facebook (META 2.88%) and Apple (AAPL 1.01%) have been incredible investments over the past 10 years, each returning about 600%. Both are among the largest publicly traded companies in the U.S. For investors looking for stable, long-term returns, which is the better investing opportunity?
On this clip from Motley Fool Live recorded on Feb. 3, "The Wrap" host Jason Hall and Fool.com contributors Danny Vena and Brian Stoffel provide insight into what the next 10 years could hold for these tech giants.
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Jason Hall: Let's have a little more grown up conversation about this. Let's think about the next decade. Because that's when things start unlocking and I'll preface it. Then, Brian, I'll have you go first and then, Danny, I'll let you have the last word on this one. I'll preface with this. Thinking about over the next decade, a couple of things.
Start with Apple. The super-cycle for the 5G products, I think it's going to be enormous over the next three years. The first year for the new series of iPhones, I think it's going to be huge. The second-year is probably still going to be pretty good. But I think it's going to continue for the third year as 5G becomes more accessible around the world. I think it's going to be extended. By the time we get to that third year, it's not going to be the model.
Phones are going to continue to add other features, but I think 5G is going to be the story for driving Apple's upgrade cycle, very strong unit sales for at least three years. It's really going to unlock those services revenues that aren't things that come through a marketplace where they're taking a cut of somebody else's money, is Apple services. I think that's really going to grow and that's going to drive a lot of revenue and a lot of margin over the next 10 years.
Tim Cook has proved incredible. As much as they may have lost that innovative edge, I couldn't think of a better CEO to have come in to have a financial edge in terms of allocating those massive capitals to deliver incredible per share value. He's been the best CEO of the past decade. I can't think of anybody else that has been a better CEO at doing that one thing that create a more value for investors than he has. That's the case for Apple.
The case for Facebook for me over the next decade is the regulatory challenges that could push the company to be broken up. Assuming the company's broken up and not part sold off to other entities, but if they were to be spun out, Instagram, for example, were to be spun out as a separately traded company, people that bought Facebook today would get enormous benefit from owning multiple social media platforms that are forced to compete against one another to deliver a better product to the users so that the customers, which are the ad buyers, want to pay up for access to those users, you and me, who are the product. That's the case for Facebook. My guess is it's probably going to be Facebook over the next 10 years. Brian?
Brian Stoffel: This is one of those things where I sold Facebook because I think it's unhealthy.
Jason Hall: You and I sold Facebook for the exact same reason.
Brian Stoffel: I just think it's unhealthy for society the way it's been used. I don't think it's intended to be. I don't think that was created to be something that's unhealthy. I just think it's become something unhealthy. But doesn't mean that I can't think that its stock won't do the best.
Cigarettes are terribly unhealthy and for a really long time, investment in Altria was by far, other than of all thing Southwest Airlines, explain that one to me, the best investment in the S&P 500 over a 20 year timeframe. Why? Because when everybody hates something, whoever's left is going to get more of the pie because nobody wants to go into that field. When you combine that with unlocking a value we talked about before.
When I do my own anti-fragile ratings, Facebook comes out ahead, and so my money would be on Facebook.
I want to add one other thing, Jason. That is if I were to say what Tim Cook did is that he built moats. It's not that Steve Jobs wasn't doing that, he was. But the way that the iCloud became integrated and all of your things ended up syncing with each other. It's easy for us to forget that 10 years ago, this just started about 10 years ago. It really wasn't happening the same way it is now.
The reason that those services are such a big deal is not because of the money it brings in, that's nice. But that's not the point. The point is that you bought that service and you need to have an Apple product to get it.
Jason Hall: The walled-garden.
Brian Stoffel: Right, exactly. It's the high switching costs. Tim Cook is the high switching costs CEO and he did that. That's what he was there to do.
Jason Hall: That's awesome. Danny, give us the last word on this.
Danny Vena: I think that over the next 10 years, I think there's the potential for both of these companies, Apple and Facebook, to do incredibly well.
I do think that we have not yet seen all that Apple has to offer yet. I'll use the example of the iCar. There has been a lot of talk over the years of whether or not Apple was going to get into the manufacturing of a car. It was on again and off again and on again and off again. The latest news is that Apple is partnering with an automaker and they're going to collaborate on the manufacturing of an electric vehicle. It's rumors still, we still not had any clarification, we haven't heard any confirmation from Apple.
But I still think there are areas that Apple is getting into, things that Apple is developing that we don't yet know.
What we do know is that Apple is going to be an incredible cash machine for the next decade. It's still going to refresh iPhones several more times. I think the services business is at some point, probably going to surpass the iPhone business. That may be a decade or two down the road, but I think it's coming.
From the standpoint of Facebook, I think we, as shareholders, and I am still a Facebook shareholder, would derive credible value out of Facebook splitting up into several social media companies.
I don't know if that's going to happen, we don't know what the regulatory environment is going to be and how Facebook will come out of it, but I think that Facebook will still do remarkably well. Yes, it's going to have some headwinds from Apple. But over the next decade, I'm not planning on selling any of my Facebook shares either and I think that they are both in my portfolio, have been, and will be for the foreseeable future.