Last year, rises in inflation and interest rates brought down numerous stocks across different industries. However, the start of 2023 has investors in an optimistic mood as multiple stocks have begun rising again.
Apple (AAPL 2.15%) and Disney (DIS 0.15%) have each enjoyed gradual but consistent stock growth since Jan. 1. These companies are dominating forces in their respective industries and will likely continue expanding for the long term.
Last year's sell-off has created an excellent investment opportunity, with shares in many companies on sale. However, with so many choices this January, it might be difficult to know which companies will offer the biggest gains over the long term. Apple and Disney are leading names in consumer tech and entertainment, but which is the better buy? Let's find out.
Apple is set for continued growth on VR/AR innovation
Apple shares have risen almost 9% in the first two weeks of the year as leaks of the company's one- to two-year roadmap look promising. Rumored moves, such as the release of a virtual/augmented reality (VR/AR) headset in 2023, touchscreen Macs, $99 AirPods, and a custom-designed telecom chip, could each offer a boost to revenue over the long term.
The most immediate and concrete development for Apple this year seems to be its VR/AR headset. The concept of VR has been implemented in different ways and devices for at least 30 years but has only recently been able to deliver on consumer expectations for the technology. Companies such as Meta and Sony currently dominate the space with their respective headsets, but Apple's participation in the burgeoning industry could easily push VR into mainstream use.
The iPhone company undeniably influenced the public's swift adoption of smartphones, tablets, smartwatches, and Bluetooth headphones. As a result, Apple has developed immense brand loyalty over the years, which increases its chances for success in the VR industry.
NASDAQ: AAPL
Key Data Points
According to Grand View Research, the VR market was worth $21.8 billion in 2021 and will grow at a compound annual growth rate (CAGR) of 15% until 2030. However, Apple's headset is expected to also include AR capabilities which involve an even more lucrative market. The $25.33 billion AR market is expected to see a 40.9% CAGR through 2030. As potentially one of the earliest and biggest names in AR, Apple could position itself to profit significantly from both industries' growth.
Apple shares have risen 204% since 2018 despite a recent sell-off. The company is in a perpetual state of innovation, making its stock an excellent investment for the long term.
Disney should thrive from leading position in streaming
Since Jan. 1, Disney shares have skyrocketed 15% after plummeting almost 44% in 2022. Investors have become bullish after the return of "golden era" CEO Bob Iger, a box office hit this month with Avatar: The Way of Water, and a booming parks business. Additionally, the company's leading position in the streaming industry is only more reason to rally over this entertainment giant.
Disney's latest quarter was one to forget, with its media and entertainment segment reporting a revenue loss of 3% year over year to $12.7 billion and a 91% decline in operating income of $83 million. The losses mainly stemmed from the company's significant investment in streaming content to attract subscribers to Disney+. However, its efforts weren't in vain, achieving the most subscribers in the industry in the third quarter of 2022 and holding the top spot in the fourth quarter, with 235.7 million members, versus Netflix's 223.8 million.
Streaming was a volatile market in 2022 as companies went to war over subscribers. However, the industry is worth $59.14 billion and is expected to see a CAGR of 21.3% until at least 2030. It may have cost a lot, but Disney's investment to become the leader of streaming could pay off big in the long run.
NYSE: DIS
Key Data Points
Moreover, movie theater attendance is back after pandemic challenges, evident by Disney's Avatar sequel becoming the seventh-highest-grossing film in history after only four weeks, earning $1.7 billion by Jan. 8. The film reportedly cost $350 million to produce, according to Variety, suggesting it will provide a much-needed boost to the company's media business.
Apple and Disney have nearly unparalleled dominance in tech and entertainment, which will likely see them continue growing for decades. However, the pandemic, followed by economic headwinds in 2022, hit Disney far harder than Apple. Comparing price-to-earnings ratios, Disney's ratio of 58 suggests its stock is currently too expensive, with Apple's offering more value at 22.
It's wise to keep an eye on Disney's stock to strike at the right time, but for now, Apple is the better buy.
