Apple (AAPL 1.22%) and Facebook, now known as Meta Platforms (FB 3.00%), are two of the biggest companies. As fellow tech giants, there's no doubt many investors have had to choose between the two for their investment dollars. While both have been great stocks to own over their histories, they are increasingly becoming rivals, and Meta CEO Mark Zuckerberg has repeatedly picked on Apple on recent earnings calls.
For investors wondering which is the better buy between these two tech giants today, keep reading to see the thoughts of an Apple bull and a Facebook bull.
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Apple has excellent prospects, but they may already be priced in
Parkev Tatevosian (Apple): Demand for Apple's products and services has surged since the pandemic onset. Folks spend a lot more time working, learning, and entertaining themselves at home, which bodes well for a company that sells smartphones, tablets, and computers. Its products can be used for all three uses that have become prevalent at home.
Total sales in the 12 months ended Sept. 25 increased to $365.8 billion. That's up by 33% from the $274.5 billion in sales that Apple reported during the same time in 2020. Sales expanded in all its product categories, but they were most prominent in the iPhone segment. The company recently introduced a 5G-compatible iPhone, and consumers are upgrading their phones at a rapid rate to acquire the new feature. Indeed, iPhone revenue grew from $138 billion to $192 billion from 2020 to 2021.
Moreover, Apple's ability to generate revenue from a customer does not end with selling an iPhone. A customer who buys one of its products is likely to buy one or several services (i.e., Apple Music or Apple TV+). Therefore, an increase in iPhone sales could indicate an increase in services revenue in the near term. Already, in 2021, Apple's services revenue expanded by 27%, and the services segment is more profitable than products.
However, all that great news may already be priced into Apple's stock. The company is nearing a $3 trillion market cap and is trading at price-to-free-cash-flow, price-to-earnings, and price-to-sales ratios that are close to the highest in the last ten years. If there is any downside to investing in Apple's stock, it could be the high price.
Facebook is ready for the next decade
Jeremy Bowman (Meta Platforms): Meta Platforms, the company formerly known as Facebook, has become the dominant social media company, with properties including Facebook, Instagram, and WhatsApp, and investors certainly shouldn't ignore that business. It's what's driven the company to a $1 trillion valuation, and what allows it to keep putting up impressive growth thanks to its high-margin digital advertising business.
However, what has management most excited about the future -- enough that it's changed its name -- is the metaverse. CEO Mark Zuckerberg has long had his eye on dominating the next iteration of the internet. The company acquired Oculus, the VR headset maker, in 2014, and now appears to have a head start on what could be the next major tech hardware category. Meta is also spending $10 billion a year on Facebook Reality Labs, its division devoted to virtual and augmented reality, showing how serious it is about the next big tech market.
Putting aside the metaverse, the buy case for the company is strong. The stock remains one of the most undervalued in the large-cap space, trading at a price-to-earnings ratio of just 24 even though its revenue jumped 33% in its most recent quarter. Though the company gets a lot of negative press, that hasn't had a meaningful effect on the company's business or the stickiness of its user base, which has been stable in North America and Europe and continues to grow in other parts of the world.
Both Facebook and Apple have a lot to offer investors, but the biggest test for both companies may be over the next few years as the internet transitions to the next generation of technology. Keep your eye on how Apple and Facebook compete in the metaverse, as they are likely to be the leaders and their success there will help determine the performance of their stocks.
