Facebook (META 2.67%) and Apple (AAPL 1.66%) have repeatedly butted heads over privacy standards and targeted ads over the past year. Apple's iOS 14.5 update, which rolled out in April, allowed its users to opt out of data tracking features across all apps.

The change stunned Facebook and other companies that relied on data-driven ads. Facebook claimed that eliminating personalized ads could reduce the average sales per ad dollar by up to 60% for small businesses. It also said the iOS update could reduce its Audience Network revenue by up to 50%.

Facebook CEO Mark Zuckerberg.

Image source: Facebook.

I compared these two FAANG stocks back in January, and I declared then that Apple's robust sales and its expanding services ecosystem made it a better buy than Facebook. But since I made that call, Apple's stock price has risen less than 10% as Facebook's price rallied nearly 40%.

Did I overestimate Apple's strengths and Facebook's ability to overcome its near-term challenges? Let's take a fresh look at both companies to find out.

The differences between Apple and Facebook

Apple generated 54% of its sales from the iPhone in the first nine months of fiscal 2021. It generated another 18% of its sales from Macs and iPads, and 10% from the wearables, home, and accessories segment, which sells the Apple Watch, AirPods, Apple TV, and HomePods.

Apple is gradually reducing its dependence on the iPhone by expanding its services business, which includes its App Store, iCloud platform, Apple Pay, and subscription-based services like Apple Music and Apple TV+. It generated 18% of its sales from this closely watched segment, which serves over 700 million paid subscribers, in the first nine months of the year.

Facebook's business is much simpler. It generated 98% of its revenue from ads in the first half of fiscal 2021. These ads are displayed across its namesake platform, Messenger, WhatsApp, and Instagram -- as well as its sprawling Audience Network, which reaches third-party websites and apps.

Facebook's core platform served 2.9 billion monthly active users (MAUs) last quarter, while its entire family of apps served 3.5 billion monthly active people (MAP). The remaining sliver of Facebook's revenue mainly comes from its sales of Oculus VR headsets and Portal smart screen devices.

Which FAANG stock is growing faster?

Apple's revenue and EPS increased 6% and 10%, respectively, in 2020. But in the first nine months of 2021, its revenue surged 35% year over year as the iPhone 12 -- its first family of 5G smartphones -- flew off the shelves. Its EPS also jumped 72% as it bought back $66.2 billion in shares.

Apple CEO Tim Cook.

Image source: Apple.

Analysts expect Apple's revenue and earnings to grow 34% and 70%, respectively, for the full year. However, they expect its revenue and earnings to increase just 4% and 2%, respectively, in fiscal 2022.

That slowdown can be attributed to a tough year-over-year comparison for the new iPhone 13, which might not be considered an essential upgrade for many consumers. A recent court ruling will also allow developers to bypass Apple's App Store payment system (with typically takes a 15%-30% cut of an app's revenue) and accept in-app payments with other services. The ruling could throttle the growth of Apple's services segment.

Facebook's revenue and EPS rose 22% and 57%, respectively, in 2020. Its advertising business suffered a slowdown during the pandemic's onset in the first half of the year but recovered in the second half as more businesses reopened. The U.S. election also boosted its sales of political ads, even as Facebook imposed tighter restrictions on that controversial market.

In the first half of 2020, Facebook's revenue rose 52% year over year as its EPS surged 97%. It benefited from an easy comparison to the pandemic's initial impact and the recovery of the global ad market. Analysts expect its revenue and earnings to rise 39% and 40% respectively, for the full year.

However, Facebook expects its revenue growth to decelerate in the second half of the year as it faces tougher year-over-year comparisons and "increasing ad targeting headwinds" from Apple's iOS update and potential regulatory actions against its platform. That's why analysts expect Facebook's revenue and earnings to increase just 20% and 14%, respectively, next year.

The valuations and the verdict

Apple trades at 25 times forward earnings, while Facebook has a lower forward P/E ratio of 22. That might seem a bit odd since Apple faces a tougher slowdown than Facebook next year.

However, it will also take a few more quarters for investors to gauge the full impact of Apple's iOS update on Facebook's ad business. Meanwhile, Apple's future is much clearer -- it will likely sell fewer iPhones next year, but it's weathered previous slowdowns before and still has plenty of room to expand its services ecosystem and other non-iPhone hardware businesses. 

I think both FAANG stocks are solid investments right now. But if I had to pick one over the other right now, I'd still stick with Apple's larger and less controversial business in this wobbly market.