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The ‘Magnificent 7’ tech shares proceed to be in style investments right here within the UK. Final week, six of the seven had been among the many 20 most purchased shares on Hargreaves Lansdown. Right here, I’m going to check two of them – Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN). Which is the perfect tech inventory to purchase for my portfolio in the present day?
Valuation
Let’s begin by evaluating valuations.
Apple is the cheaper inventory of the 2 when evaluating price-to-earnings (P/E) ratios. At current, Apple’s P/E ratio is 28.7. In the meantime, Amazon’s is 41.2. So, Apple wins right here.
Nonetheless, valuation is just one piece of the puzzle. With these sorts of tech shares, there are numerous different components to contemplate.
Development
One such issue is development. And right here, Amazon is successful proper now.
This yr, Amazon’s income and earnings per share (EPS) are anticipated to extend 11% and 44%, respectively.
Against this, for the yr ending 30 September 2024, Apple’s income and EPS are anticipated to extend solely 2% and seven%, respectively.
It’s value noting that if we take these EPS development figures and calculate a price-to-earnings-to-growth (PEG) ratio for the 2 shares, Amazon truly appears to be like rather a lot cheaper than Apple. Its PEG ratio is 0.94 whereas Apple’s is about 4. A PEG ratio beneath one usually suggests {that a} inventory is affordable.
Taking a longer-term view, I feel each corporations have a variety of development potential.
Amazon is more likely to see additional development from its e-commerce, digital promoting, and cloud computing companies, all of which nonetheless have lengthy development runways.
Apple, in the meantime, may see development from companies (resembling Apple Pay), new AI-enabled telephones, and its Imaginative and prescient Professional headsets or future iterations of those headsets (I think about they may look rather a lot totally different in 10 years).
Given how revolutionary these corporations are, it’s arduous to name a winner for the long term.
Share value momentum
Share value momentum can be value contemplating.
Right here, Amazon additionally wins. Its share value is in a very sturdy uptrend proper now.
In the meantime, Apple’s share value has been trending sideways for some time.
I’ll level out that Amazon has been getting a variety of value goal upgrades. After its current outcomes, no less than 10 brokers lifted their value targets (with JP Morgan and TD Cowen going to $225). This sort of dealer exercise can push an organization’s share value increased.
The dealer exercise on Apple was far much less bullish. After its current outcomes, a number of brokers downgraded their scores on the inventory.
Danger
As for danger ranges, it’s arduous to know which inventory is the riskiest.
Each corporations face intense competitors from rivals. And each may very well be impacted by an financial slowdown.
Apple pays a dividend although (and is shopping for again a ton of shares). It additionally has a a lot increased return on capital than Amazon.
So, I’d most likely say it’s rather less dangerous than Amazon.
My view
Placing this all collectively although, I feel Amazon is the winner. Its income are rising quickly proper now and the inventory has a variety of momentum.
I’m probably so as to add to my holding within the close to future.
