Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN) are rarely mentioned in the same breath. Over the last couple years Apple has become more of a commodity, with AAPL stock an unquestioned value play. Meanwhile, Amazon stock is the quintessential definition of growth and momentum. Thus, one might say that a comparison between Apple stock and AMZN stock is hardly comparable.
There is, however, one major similarity: Both are securities that an investor can buy tomorrow, forget about over the next two decades, and make a ton of money. Furthermore, it is not a bad hedge either, owning growth & value.
Why AAPL stock is a buy, hold, & forget investment
Historically, technology companies have a short shelf life, and tech stocks are only as good as a product cycle. However, there are the exceptions like Microsoft, or Apple stock that survive and thrive through the ages.
For Apple, it has planted such deep roots in the heart of everyday consumer life that it will do well. Nevermind the iPhone, iPad, and Apple’s hardware. The real long-term value lies in its ecosystem having 800 million credit cards on file.
The company has overcome its image as a one hit wonder to launch countless smaller products and services that all feed off its ecosystem. Its Services have double digit growth and have become Apple’s second largest segment. And while the iPhone remains Apple’s flagship product, it has become increasingly apparent that the future of Apple rests on Services and a variety of products.
With that said, AAPL stock has everything investors want to create long-term value. Apple has reduced its share count by 15% over the last three years via buybacks. During that span AAPL stock gains have outperformed its market capitalization gains by nearly 100%, a trend investors can expect to continue as Apple continues to buyback stock.
Furthermore, AAPL stock pays a 2% yield and trades at just 11.5 times forward earnings. With $200 billion in cash & equivalents and 100s of million on its network, investors can expect long-term value in AAPL stock.
Amazon stock is complete opposite, but also the same
Take everything we like about AAPL stock, and the complete opposite is how we would describe Amazon.com. In fact, after having Amazon stock as one of our highest rated stocks for years, we just recently downgraded it on short-term concerns at $830, saying that 2017 will be rough for AMZN stock.
Nonetheless, regardless if Amazon stock has a rough 2017 or not, the point here is that long-term AMZN stock is about as golden as investments come.
For example, there is no way possible to validate Amazon.com’s $370 billion valuation as is today. But when you start breaking it down, you quickly realize that Amazon.com might very well be the most valuable company in the world 10 years from now.
Its hard to imagine with AMZN stock trading at nearly 45x free cash flow. However, Amazon has three projects that could effectively take Amazon.com from a $370 billion company to a trillion dollar market capitalization.
First there is Amazon Web Services. AWS is growing 50% year-over-year with revenue of $3.2 billion in Amazon’s last quarter. It is small relative to Amazon’s total revenue, but is responsible for a big chunk of profits. As explained in a previous article, AWS could be worth $300 billion by itself long-term.
Next, the big catalyst for Amazon stock over the next decade is the company’s plan to disrupt the logistics and grocery retail industries like it did with books, e-commerce, business services, etc. Given Amazon’s history, I would not bet against them with register free grocery stores, drones, trucking apps, and its potential to complete disrupt two equally large $800 billion industries.
Therefore, Amazon stock may look expensive now, but when you consider its history of innovation and disruption, you have to give Bezos & Co the benefit of doubt. Specifically, if Amazon can do in the logistics and grocery space what it did in retail, books, and cloud services, then Amazon stock will support the world’s largest market capitalization.
All things considered, these may be two completely different companies, but the one thing Amazon stock and AAPL stock have in common is that both are buy, hold, and forget investments.