Best Stock to Buy Right Now: Amazon vs. Apple

The top tech companies frequently attract the attention of investors. Historically, these giants have provided impressive returns for their shareholders.

Two of the most notable examples in this space are Amazon (NASDAQ: AMZN) and Apple (NASDAQ: AAPL). Both of these successful companies have a significant impact on the daily lives of billions of people.

As large enterprises, Amazon and Apple deserve to be considered when looking for investments.

Amazon: Growth Opportunities

In the past year, Amazon has generated net sales of approximately $620 billion. This substantial figure might lead one to think there is limited potential for future growth. However, this belief is misguided as Amazon continues to benefit from several positive market trends.

Amazon is the leading player in the e-commerce sector, with nearly 40% of all online shopping in the U.S. happening through its platform. This is significantly ahead of its closest competitor, Walmart. Furthermore, e-commerce currently accounts for only 16% of total retail sales in the U.S., indicating a long path for Amazon to expand its market share.

Beyond just e-commerce, Amazon is also a significant player in cloud computing through its Amazon Web Services (AWS). It holds a remarkable 31% share of the global cloud market. Recently, revenue growth for AWS has picked up, partly driven by increasing demand for artificial intelligence (AI) services.

Under the leadership of CEO Andy Jassy, Amazon has been focusing on reducing costs and improving operational efficiency. Like any large organization, Amazon developed some inefficiencies that needed rectification. This focus on efficiency is welcomed by investors.

As a result, Amazon's earnings have surged. In the third quarter, the operating income jumped 55% to $17.4 billion year-over-year. The company's management expects this income level to grow another 36% during the recently completed fourth quarter. Analysts forecast a revenue increase of 11% for 2025; however, they predict that operating income will grow only 21%. This trend of strong income growth is expected to continue longer term.

Apple: Strong Brand Loyalty

Apple stands as the world's most valuable corporation, boasting a market capitalization of nearly $3.7 trillion. This achievement can largely be attributed to its powerful brand, which is synonymous with premium quality, innovative design, and reliability.

Apple's hardware, especially the iPhone, receives significant attention and is responsible for a staggering 51% of the company's total revenue in the fiscal year 2024 (ending September 28). This device has helped to establish Apple as a global leader. However, growth in hardware sales has started to slow down.

In contrast, Apple's software and services, such as Apple TV+, iCloud, Apple Pay, and advertising solutions, are becoming increasingly vital for the business. Over the past three years, the revenue from this segment has grown at a compound annual rate of 12%, surpassing hardware growth and presenting a gross margin of 74%.

The integration of hardware and software within Apple creates a robust ecosystem that encourages customer loyalty and makes it difficult for users to switch to competitors.

Another advantage for Apple is its solid financial position. The company reported net income of $93.7 billion for fiscal 2024, achieving a net profit margin of 24%. This strong profitability has allowed Apple to maintain a robust balance sheet with $50 billion in net cash, minimizing financial risks for investors.

Evaluating Price

Both Amazon and Apple are exceptional companies. However, investors should also consider their valuations, as the price of a stock is crucial.

Currently, Amazon has a forward price-to-earnings (P/E) ratio of 36, while Apple's stands at 33. The faster expansion of Amazon's bottom line compared to Apple's more tempered growth suggests that a slightly higher valuation for Amazon may be justified.

Looking ahead over the next five years, it is believed that Amazon holds the potential to deliver a better return on investment than Apple, making it a more attractive stock to buy right now.

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