Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Comparing Apples to Oranges: Apple Inc. (AAPL) vs, Inc. (AMZN)

Page 1 of 2

Life isn’t fair. We all have to accept that. The stock market is fickle and rewards companies on what it thinks the future will bring, regardless of what the company has done in the past in many cases. An excellent example of this is Apple Inc. (NASDAQ:AAPL) compared and contrasted to, Inc. (NASDAQ:AMZN). Over the past 3 months, the two stocks have gone in opposite directions with Apple falling about 25% from its high and Amazon soaring to new highs.

Mr. Market in essence is assuming negative growth from Apple Inc. (NASDAQ:AAPL) in the future and explosive growth from Amazon. Apple is being seen as not bringing any new products to markets, ever, while Amazon is seeing as exploiting every single strength it has with ever-expanding margins and growth into new markets. I would be very skeptical about those assumptions. Let’s look at what to expect in the future for both these companies.

Apple Inc. (NASDAQ:AAPL)EPS growth at Apple Inc. (NASDAQ:AAPL) was flat from a year ago and would have grown some if the time periods in each quarter had been equal. Its EPS growth is expected to be flat or to grow in the single digits under the best of conditions if no new products are introduced. EPS growth at Amazon is expected to take off in the next few years with lofty projections of $5 per share in 2014 from essentially break even now (it actually lost $69 million for the year 2012).

Let’s look at a different measure: cash growth. Apple Inc. (NASDAQ:AAPL) grew cash from $120 Billion to $137 Billion from one quarter to another, a growth of about 14%. Amazon on the other hand increased its cash position from $5.25 Billion to $8.08 Billion in the quarter by borrowing $3.3 Billion. Essentially, after subtracting debt, Amazon’s cash position worsened. The optimist will say that Amazon is using its free cash flow to invest in its future, and that it took advantage of borrowing at very low rates. I say, show me the money!

Apple Inc. (NASDAQ:AAPL) continues to grow its cash pile, and despite returning money to its shareholders with a dividend of $2.65 per share, the growth in cash has been impressive. Apple has no debt.

Revenue growth projections for Apple remain healthy in the 10-20% range for the next year or two, but margins are projected to continue to decrease and that may lead to negative growth in EPS. Apple Inc. (NASDAQ:AAPL) could fix this by aggressively buying back shares. Revenue growth at Amazon should remain in the 20-25% level, and, this is key, its margins are expected to continue to increase from its current paltry levels. Even small increases in the case of Amazon should provide healthy profits in the future, but that is assuming that those margins can continue to increase. Many of Amazon’s businesses represent high-growth and high-margin affairs such as its relationship with third party vendors and cloud services, but the bulk of its business will remain a low-margin affair. Retailing remains a razor-margin business no matter how you slice it.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!