Earnings season is in full swing, with many of the world's valuable companies experiencing major stock fluctuations over the last week. Amazon (AMZN -0.87%) and Apple (AAPL -2.88%) are two of the biggest companies to report quarterly results in August.
Amazon enjoyed a glowing quarter, with many of its segments experiencing solid growth. Meanwhile, macroeconomic headwinds led to declining product sales for Apple.
However, both companies have strong long-term outlooks thanks to expanding positions in lucrative markets such as artificial intelligence (AI), cloud computing, and virtual/augmented reality. As a result, it's not a bad idea to consider adding one of these tech stocks to your portfolio before it's too late.
So, let's take a look at whether Amazon or Apple stock is the better buy right now.
Amazon
After being one of the hardest-hit companies amid the economic downturn over the last year, Amazon came back strong in the second quarter of 2023. The company's revenue climbed nearly 11% year over year to $134 billion. Meanwhile, its North American and international e-commerce segments reported double-digit revenue growth after facing steep declines in 2022. Moreover, the company's cloud platform, Amazon Web Services (AWS), reported a 12% increase in revenue, hitting $22 billion.
Amazon's successful quarter brought a 130% increase in operating income, mainly driven by increased sales in its North American segment. The positive results rallied investors, with its stock up 6% since the start of August.
Meanwhile, Amazon has massive potential in AI over the long term. The company invested heavily in the sector since the start of 2023, with CEO Andy Jassy saying in a recent earnings call that multiple areas of the company's business have AI projects under development. Generative AI has become a major focus of Amazon's long-term roadmap, introducing several new tools to AWS since June and announcing a venture into chip development.
As the home of the world's largest cloud platform with AWS, as well as a recovering e-commerce business, Amazon's stock makes a compelling investment right now.
Apple
Apple didn't fare as well as Amazon in its latest quarter (Q3 2023), with revenue falling by 1% year over year after declines across its product lineup. Its iPhone segment, which makes up about 50% of the company's revenue, reported a 2% dip in sales, with a 7% tumble in its Mac business and a 20% decrease in iPad sales. The tech giant's stock subsequently fell 7% in the first week of August.
However, it's not all bad news for Apple. The company holds leading market shares across tech, including smartphones, tablets, smartwatches, and headphones. Its dominance in these industries has partially safeguarded its business amid an economic downturn and allowed it to outperform the competition.
For example, in Q2 2023, smartphone shipments fell 24% in the U.S., according to Counterpoint Research, with Samsung's and Motorola's sales declining 37% and 17%, respectively. Yet the same quarter saw iPhone sales decrease by a more moderate 6% as its smartphone market share rose from 52% to 55%.
Additionally, Apple is making a major push into AI. The company is gradually adding AI-enabled features across its product lineup, with CEO Tim Cook revealing its $23 billion in research and development spending in Q3 2023 was largely owed to its expansion in generative AI.
Is Amazon or Apple the better buy?
The choice between Amazon and Apple is complex. Amazon enjoyed a far better quarter than the iPhone company, yet has experienced more volatility in recent years. In fact, over the last five years, Amazon's stock has risen 53%, while Apple's has soared 250%. The significant difference suggests Apple is the most reliable choice.
When comparing value, Apple's forward price-to-earnings ratio of 30 is more than half of Amazon's 66, indicating that the iPhone company is the cheaper option. Meanwhile, Apple's stock dip could be the perfect time to buy, as the company's shares don't often stay down for long.
As a result, Apple is the better buy. However, Amazon remains an incredibly attractive option as its business recovers from recent macroeconomic headwinds and AWS expands its AI offerings.
