After a challenging 2022, when countless companies suffered steep stock declines, 2023 has seen Wall Street rally over industries that fell out of favor last year. For instance, the entertainment and tech industries have attracted bullish investors, with market leaders Apple (AAPL -0.35%) and Disney (DIS -0.04%) seeing their stocks rise about 17% and 14%, respectively, since Jan. 1. That's after Apple's stock fell roughly 27% and Disney's 44% in 2022.
These companies are leaders in their respective industries while also in direct competition in streaming. As Apple and Disney's stocks show signs of recovery, now is an excellent time to consider investing. So which is the better buy? Let's take a look.
Apple: The king of reliability
Last year, the Nasdaq-100 Technology Sector index fell 40%, while Apple's more moderate decline of 27% meant it outperformed peers like Alphabet and Amazon, which saw their stocks plunge by 38% and 49% respectively. As a result, the iPhone company proved its resilience last year, with macroeconomic strains hitting its competitors harder.
An innovative technology stock, Apple climbed about 247% in the last five years and 832% in the last decade. Meanwhile, revenue increased by 48% to $394.33 billion since 2018, and operating income soared 68% to $119.44 billion. The company's consistent growth has gained it a reputation for reliability, which safeguards its stock in the case of dismal quarterly results.
For example, in the first quarter of 2023, Apple reported its first quarterly revenue decline since 2019, with revenue falling 5.5% year over year to $117.15 billion and missing analysts' forecasts by $4.5 billion. While a quarterly miss will often send a company's stock tumbling, Apple shares rose 6% in the week after its earnings release.The company's consistent growth over the long term makes temporary headwinds inconsequential to many of its investors.
Regarding the next year, Apple has some promising developments, which include a reported venture into the virtual/augmented reality (VR/AR) markets with the release of a new headset and other updates to its product lineup. The AR and VR market is projected to reach $31.12 billion in 2023 and hit $52.05 billion by 2027, expanding at a compound annual growth rate of 13.72%.
With potentially lucrative projects in the works and reliable growth over the long term, Apple always feels like a smart investment.
Disney: A box office smash
Disney's Q1 2023 was a mixed bag, with revenue of $23.51 billion rising 7.7% year over year and beating Wall Street forecasts by $230 million. However, the quarter was tainted by a loss of 2.4 million subscribers on Disney+ when its biggest competitor, Netflix, gained more than 7 million new members in the same period.
Despite the mixed quarter, Disney has started the year with a bang after a massive hit at the box office. Avatar: The Way of Water overtook 1997's Titanic as the third-highest-grossing movie of all time this month, having earned $2.24 billion globally so far.
According to Variety, Disney and 20th Century spent about $460 million producing and promoting the Avatar sequel, suggesting the company's entertainment segment can likely expect a significant boost to earnings in its current quarter. The profit bump is positive, considering Disney's latest quarter saw the segment report $10 million in operating losses after a costly investment in streaming content.
Disney has had a rough few years, with the pandemic depleting box office and parks revenue in 2020 and 2021, then economic headwinds in 2022 straining the company's expensive streaming venture. As a result, Disney's stock declined by about 2.8% in the last five years and rose by 88% in the last 10 years.
A solid return of park guests and theater audiences suggests the House of Mouse is back on the path to growth. However, Apple's strength amid economic declines, its history of consistent long-term growth, and lucrative developments in its future make it the better stock. Additionally, Apple's price-to-earnings ratio of 22 compared to Disney's 47 makes its stock a far better value right now.
