Apple Inc. (NASDAQ:AAPL) and Facebook Inc. (NASDAQ:FB) are arguably the two most influential technology companies of the 21st Century. Apple didn’t invent the personal computer, mobile phone, tablet, or music player, but it made them appealing to a broad audience.
Facebook transformed a social media site into almost a societal necessity which became ground zero for accusations of political meddling in the aftermath of the Trump vs Clinton presidential election.
Both companies experienced record high market caps in the aftermath of the global pandemic. Their earnings showed that the steps each has taken in their respective paths to world conquest are working. But which is the better investment between Apple stock vs Facebook?
For investors the key is to examine the two business models, their responses to the pandemic, and their strengths and weaknesses heading into the 2020s.
Both companies have a proven track record of keeping investors happy and have solid business models spread across different revenue streams. Let’s examine them both, starting with Apple.
Apple Stock Worth $2 Trillion And Counting?
Apple stock was largely unaffected by neither the crash following the pandemic nor the election, with its September 2020 (fiscal Q4) quarter showing a record $64.7 billion in revenue, or $0.73 per diluted share.
The company also paid $0.205 per share for its quarterly cash dividend, with its stores slowly reopening around the world.
In fact, international sales accounted for 59 percent of the company’s total revenue on its way to maintaining its status as a $2 trillion company.
Its stock hovered between a low of $53.15 during the coronavirus crash to $137.98 per share at its height. Its been circling $110 for the back half of 2020, with a P/E ratio of 35.10.
Its MacBooks are a strong revenue generating product to supplement the iPhone, Apple Watch, AirPods, and other hardware sales.
Apple’s software and content are going strong too, with Apple TV increasing its popularity and successfully outlasting rivals like Quibi.
Moving forward, expect Apple to continue leveraging its strong brand recognition for strong sales. It built a proprietary ecosystem that includes smart home, entertainment, and more. On top of this, it’s beloved by many creative professionals and has a solid enterprise presence. There are some problems coming up in the 5G race, but things look relatively positive for Apple’s future.
Facebook Quashed An Advertiser Revolt & Soared
Facebook hit a slump at the beginning of the year when several well-known brands announced they would stop spending on Facebook advertising. This came in the wake of several years of complaints that the company doesn’t do enough to regulate its platform and make it safe.
It wasn’t long before it started to rally against “fake news” as both the coronavirus and election hit.
The company seemed unfazed as it earned $2.71 per diluted share in the third quarter of 2020, versus $2.12 in the same quarter of the prior year. This came off of $21.221 billion in advertising revenue and $7.846 billion in net income.
Facebook not only runs the social media game with its namesake platform, Instagram, and WhatsApp, but it’s also a major player in the burgeoning virtual reality space. Its Oculus Quest 2 headset is competing well with new console releases from Sony (SNE) and Microsoft (MSFT), and its Portal video conferencing device is working to further expand its reach.
Although the pandemic increased reliance on social media, the holiday season saw user numbers start to flatline. They could even go down in 2021, as the world starts to reopen and level off. There are also some big problems from the government looming, which we’ll discuss next.
Could Apple Stock Be Hit By Slowing iPhone Sales?
The biggest risk in Apple’s stock is its revenues are heavily dependent on the iPhone. If the U.S. China trade war heats up, it could find itself a casualty just like Huawei was.
Its high exposure in China comes with a lot of risks, and that’s not good for bearish investors who already fear it may be overweighted while trading at a P/E ratio of 35x.
Because Apple products carry a premium, there’s a chance that consumer preferences will shift toward cheaper devices, chipping away at its ecosystem.
It also took on a major expense by producing its own content for Apple TV, something it feels it needs to do to remain competitive with the likes of Amazon (AMZN), Netflix (NFLX), and Google (GOOG). These investments could pay off, but they could also create a financial black hole for the company that limits its growth potential.
Dangers Of Investing in Facebook
Facebook’s rivals aren’t necessarily tech companies, but the U.S. government. Federal regulators and legislatures breathed down CEO Mark Zuckerberg’s neck throughout the tail end of the 2010s, and 2021 looks to be the stage for a heated antitrust debate about the company’s stranglehold on the social media landscape.
If the company loses Instagram and WhatsApp (which it worked over the past few years to integrate into each other), it could create problems in its main advertising streams.
The company is trading at a slight discount compared to Apple, with a P/E ratio of 34.95. It also has competition from emerging social platforms that gained popularity in the wake of accusations Facebook was used to meddle in the 2016 election.
Zuckerberg became the mascot for digital privacy, and he has a hard fight ahead to keep everything Facebook built under one roof.
Facebook Vs Apple Stock: The Bottom Line
Apple and Facebook are two of the biggest tech companies with worldwide brand recognition. Each survived the stock market crash following the pandemic to reach historic high market caps, and many believe the sky is the limit for both.
While Facebook struggles to maintain relevancy (and legality), Apple is pursuing new revenue streams by becoming the creatives they historically supported.
Facebook has risks involving its regulatory status, and Apple is an American brand that could get caught up in the crossfire of an escalating trade war. The path ahead isn’t smooth sailing for either company, but they have the financial resources and brand recognition to create wins when necessary.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.