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2021-08-20
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Apple Vs. Microsoft Stock: Which Is The Better Buy?
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{"i18n":{"language":"zh_CN"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":838702010,"tweetId":"838702010","gmtCreate":1629427192430,"gmtModify":1631893869156,"author":{"id":3555104076236141,"idStr":"3555104076236141","authorId":3555104076236141,"authorIdStr":"3555104076236141","name":"Roarhigher","avatar":"https://static.tigerbbs.com/80741e96f295312c1997c6a41bb6ea13","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":20,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body><p>Like both. </p></body></html>","htmlText":"<html><head></head><body><p>Like both. </p></body></html>","text":"Like both.","highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":2,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/838702010","repostId":1153219714,"repostType":4,"repost":{"id":"1153219714","pubTimestamp":1629425622,"share":"https://www.laohu8.com/m/news/1153219714?lang=&edition=full","pubTime":"2021-08-20 10:13","market":"us","language":"en","title":"Apple Vs. Microsoft Stock: Which Is The Better Buy?","url":"https://stock-news.laohu8.com/highlight/detail?id=1153219714","media":"seekingalpha","summary":"Summary\n\nMicrosoft’s transition from console gaming to a cloud streaming format could result in a ro","content":"<p><b>Summary</b></p>\n<ul>\n <li>Microsoft’s transition from console gaming to a cloud streaming format could result in a robust revenue stream.</li>\n <li>Microsoft’s AR/VR products also hold hope for growth.</li>\n <li>Apple's iPhone and other products garner a level of customer loyalty second to none.</li>\n <li>Apple’s ecosystem provides a competitive advantage while the services segment delivers high margins.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/86757d2b7d17b7fe7071210bad77f795\" tg-width=\"1536\" tg-height=\"800\" referrerpolicy=\"no-referrer\"><span>ipopba/iStock via Getty Images</span></p>\n<p>It has been nearly a half year since I last compared an investment in Apple Inc. (AAPL) to Microsoft Corporation (MSFT). Here is an excerpt from that article,Apple Or Microsoft Stock: The Better Investment, in which I provided my conclusion.</p>\n<blockquote>\n Without reservation, I rate Microsoft as the better investment of the two.\n</blockquote>\n<blockquote>\n As a value investor, I’ve been reluctant to invest in stocks with high price to earnings multiples. I mitigate my risk with high growth investments by adding incrementally to my positions when I believe a name trades near fair value. The results of my investigations for this article prompted me to increase my Microsoft position by a small percentage.\n</blockquote>\n<blockquote>\n I am not a buyer of Apple at this point.\n</blockquote>\n<p>So how did investments in Apple and Microsoft perform since that article debuted?</p>\n<p>Microsoft stock is up 29.2%, Apple’s share price increased by 7.2%, and the S&P 500 climbed 16.4%.</p>\n<p>Although Microsoft and Apple are tech behemoths, many of their products are not in direct competition. Both reported double-digit revenue gains during the most recent earnings reports, and each company has areas of high growth that could continue to drive future returns.</p>\n<p><b>Recent Quarterly Results Hold Clues To Apple’s Future</b></p>\n<p>(All figures are year-over-year unless otherwise noted.)</p>\n<p>Apple reported Q3 2021 results on July 27th. EPS of $1.30 beat analysts' estimates of $1.01 by a wide margin.</p>\n<p>That was also true of revenue of $81.41 billion, up 36% year-over year.</p>\n<p>Reviewing the company’s five segments, iPhone sales hit $39.7 billion, a surge of nearly 50%. Services revenue of $17.48 billion was up 33%, while the Other Products segment, with sales of $8.76 billion, provided growth of 40%.</p>\n<p>With revenue of $8.24 billion, Mac was up 16%. iPad recorded 12% growth with revenue of $7.37 billion.</p>\n<p>The company set June quarter record sales for Wearables, Home and Accessories, and for Mac.</p>\n<p>Luca Maestri, Apple’s CFO, provided the following guidance for Q4:</p>\n<blockquote>\n We expect very strong double digit year-over-year revenue growth during the September quarter. We expect revenue growth to be lower than our June quarter year-over-year growth of 36% for three reasons.\n</blockquote>\n<p>Maestri went on to list unfavorable foreign exchange rates, supply constraints, and slowing growth in the services segment as reasons to expect less robust growth in the coming quarter. He opined that services would “return to a more typical level… as certain services were significantly impacted by the COVID lockdowns a year ago. ”</p>\n<p>He added that supply constraints will primarily impact iPhone and iPad.</p>\n<p>While I don’t doubt Maestri’s contention that services will slow somewhat, I think many investors fail to grasp the weight services hold in terms of both future growth and profit.</p>\n<p>Although it is true that the iPhone generates nearly half of total revenues, the hoopla associated with new iPhone launches diminishes investors’ understanding of the role services plays.</p>\n<p>Perusing the Q3 quarterly report provides two facts worthy of consideration: Apple’s overall gross margin was 43.3%. The services segment had a gross margin of 69.8%. While hardware provided most of the revenue, services provided an oversized share of the profits.</p>\n<p>Ponder the following two charts.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/4f9ce03190bc913f772ca25bfbf55b8d\" tg-width=\"1280\" tg-height=\"895\" referrerpolicy=\"no-referrer\"><span>Source: 9TO5Mac</span></p>\n<p>The first chart records the growth in spending on apps in the U.S. While Apple dominates the smartphone market in the States and Japan, nearly three-quarters of the globe's mobile device market share operates on an Android system. Furthermore, Google’s Play Store has 2.56 million apps versus 1.85 million on Apple’s App Store.</p>\n<p>Even so, Android developer shave earned $80 billion versus $155 billion paid to iOS developers over the years.</p>\n<p>The next graph provides insight into the growth of Apple’s services segment over the last half decade.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/87a67ae2bbffc90c30902c77a69def22\" tg-width=\"577\" tg-height=\"337\" referrerpolicy=\"no-referrer\"><span>Source: Metrics Statista / chart by author</span></p>\n<p>The data provides a record of seemingly inexorable growth. Note the increases are not dependent on new iPhone cycles.</p>\n<p>Apple is continually rolling out new service offerings: Apple TV+, Apple Arcade, Apple News+, Apple Fitness+, iCloud+, Apple Wallet features, and the Apple One bundle are all examples of fairly recent additions to the company’s services portfolio.</p>\n<p>The company now counts more than 700 million paid subscriptions across the services platform. That is an increase of more than 150 million over last year, and almost four times the number of paid subscriptions of four years ago.</p>\n<p>The ubiquitous nature of smartphones has led to near saturation levels among consumers in many regions. For example, 91% of U.S. households own smartphones. Mordor Intelligence forecasts a CAGR of 11.2% for global smartphone sales for 2021-2026.</p>\n<p>A study by Market Data Forecast is a bit less sanguine. That firm predicts a CAGR of 6.85% from 2021-2025, with iOS growth of 7.4% during that time period.</p>\n<p>While those represent reasonable growth rates, Apple is viewed as a high growth company, and the shares are valued with investors anticipating continued robust growth. Consequently, even the 11.2% CAGR predicted by Mordor Intelligence may not be sufficient to view the stock as a favored investment.</p>\n<p>However, when one adds the service sector growth and profit margins to the equation, we may have enough to tip the scales in the company’s favor.</p>\n<p>Another area that could experience slowed growth are Mac sales.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/22f3db391e2a791a54a5c01dfdfde7cb\" tg-width=\"620\" tg-height=\"334\" width=\"100%\" height=\"auto\"><span>Source:Seeking Alpha</span></p>\n<p>Daniel Research Group forecasts PC and related device's US sales will record a CAGR of 3% from 2021 through 2025, while IDC forecasts a 1.4% growth rate for global shipments of desktop and notebook PCs in 2021.</p>\n<p>Do not misunderstand my position. I acknowledge that the latest iteration of the iPhone has been quite successful. I would also add that the company’s move to design ARM-based chips should work to improve margins on the affected hardware. However, the saturated nature of the smartphone market could slow growth for Apple, while the services business likely has a long growth runway.</p>\n<p><b>Clues In Microsoft Earnings, Too</b></p>\n<p>(All figures are year-over-year unless otherwise noted.)</p>\n<p>Microsoft reported Q4 21 earnings in the last week of July.</p>\n<p>Overall revenue growth increased 22% to $46.2 billion. Earnings per share of $2.17 increased 49%.</p>\n<p>Free cash flow of $16.3 billion grew 17%, although this metric was stunted somewhat by higher capex related to the cloud business.</p>\n<p>Productivity and Business Processes revenue of $14.7 billion grew by 25%. Management guides for Q1 revenues for the segment of $14.5 billion to $14.75 billion from continued strength in Office Commercial and Office 365.</p>\n<p>Office Commercial products and cloud services revenue increased 20%.</p>\n<p>Intelligent Cloud revenues surged 30% to $17.4 billion, while Azure cloud platform revenue grew by 51%. Revenue in Q1 for Intelligent Cloud is forecast at $16.40 billion to $16.65 billion. Azure growth is forecast to remain stable quarter-over-quarter.</p>\n<p>More Personal Computing revenue also increased 9% to $14.1 billion. Guidance for More Personal Computing sales are $12.40 billion to $12.80 billion in Q1.</p>\n<p>Assuming guidance is accurate, it provides us with an interesting stat.</p>\n<p>If the combined guidance for the segments proves accurate, it equates to an overall revenues of $43.3 billion to $44.2 billion for Q1 2022. This compares to Q1 2020 revenue of $37.15 billion, an approximate 18% growth in revenue at the mid range of guidance.</p>\n<p>The chart below shows the annual revenue growth over the last half decade.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e3997d3280e5d34d9fd174d01b21d013\" tg-width=\"576\" tg-height=\"336\" width=\"100%\" height=\"auto\"><span>Source:MSFT Investor Relations</span></p>\n<p>Investors understandably question whether behemoths such as MSFT and Apple can continue the rapid growth rates witnessed in prior years. However. as noted above, growth for Microsoft is accelerating.</p>\n<p><b>Show Me The Growth</b></p>\n<p>Investors can rest assured that Microsoft has growth avenues on several fronts.</p>\n<p>One is Microsoft’s Dynamics 365. Like many of Microsoft’s offerings, Dynamics is shifting to a subscription model. In the latest quarterly report, management guided for revenue growth from Dynamics in the high twenty percent range.</p>\n<p>Dynamics provides a variety of enterprise resource planning (ERP) and customer relationship management (CRM) business applications.</p>\n<blockquote>\n And first of all, we're very, very excited about what's happening again with Dynamics 365. And when you ask where is the share coming and where is the growth coming? It's coming from all those (ERP and CRM) categories.\n</blockquote>\n<blockquote>\n Satya Nadella,CEO\n</blockquote>\n<p>Unfortunately, it only contributes a low single-digit percentage share of total revenues; however, the CRM market is forecast to total a bit over $94 billion in 2027, with an expected CAGR of 11.3%. During the same time period, a report by Allied Market Research projects the ERP market will reach over $86 billion, with a CAGR of 9.8%.</p>\n<p>Developments related to Dynamics are to be watched for its long-term potential rather than as a source of immediate growth, due to the low percentage of revenues it currently provides.</p>\n<p>A second growth driver, and one with greater potential, is Microsoft’s evolution away from console based gaming to cloud streaming. The company’s Game Pass, a video game subscription service that can be used with Xbox Cloud Gaming,topped23 million subscribers last April. That marked an 8 million member increase since last September.</p>\n<p>Game Pass Ultimate also provides access to Android devices in addition to allowing gamers use of consoles and Windows PCs. Microsoft is also working with manufacturers to provide Xbox Game Pass through a TV app, as well as through a dedicated streaming stick.</p>\n<p>With the acquisition in March of ZeniMax Media, the company moved aggressively to increase the number of video game studios under its umbrella from 15 to 23. During the Q4 earnings call, management noted Microsoft recently released 27 new games, and that Game Pass subscribers play 40% more games and spend 50% more than nonmembers.</p>\n<p>Fortune Business Insightsforecaststhe global cloud gaming market will grow from $169.2 million to roughly $1.9 billion, a CAGR of nearly 41%, from 2021 through 2028. Forbes predicts Xbox Game Pass is likely to reach 30 million subscribers in 2021, following the release of Halo Infinite.</p>\n<p>Sony’s answer to Xbox Game Pass, known as PlayStation Now, only had 3.2 millionsubscribersas of the end of FY 2020. Not only has the company stolen a march on Sony, Microsoft also has a significant advantage when competing for cloud based gamers.</p>\n<p>Project xCloud is the codename for a cloud gaming platform designed by Microsoft. Project xCloud has access to one of the largest networks of data centers on the globe. This network reduces latency (time lag) by allowing the local servicing of game requests, thereby enhancing the gamer’s experience.</p>\n<p>xCloud will eventually provide access to games through any device with a screen and internet connection, eliminating the need for consoles and PCs.</p>\n<p>Roughly a month after Microsoft closed the deal on ZeniMax gaming studios, the company moved to acquire Nuance Communications (NUAN). While largely focused on healthcare records, Nuance also has customer engagement and security solutions businesses.</p>\n<p>Nuance and Microsoft have had a strategic alliance since 2019, and Nuance is built on Azure.Nuanceis also used by 77% of hospitals, half of physicians and three quarters of radiologists in the U.S. Although the acquisition is not expected to be accretive until 2023, it is apparent that management views the healthcare industry as a prime source of future growth.</p>\n<blockquote>\n When I look at the industry cloud opportunities, we think of healthcare is a very critical opportunity for us and a huge and expansive addressable market. If you think about as a percentage of GDP, obviously, healthcare is significant. And fundamentally, when I think about the provider market, in particular, digital tech is going to play a huge role for every provider to do the things that they care the most about, which is improve the patient outcomes and reduce cost and reduce the burden on the physicians.\n</blockquote>\n<blockquote>\n Satya Nadella,CEO\n</blockquote>\n<p>While the areas I’ve listed above show latent growth, there is little doubt that the cloud will serve to expand revenues for the foreseeable future. The company is placing so much emphasis on cloud that in the last quarterly call management stated FCF was negatively affected by cloud related capex.</p>\n<blockquote>\n Over the past year we have added new data center regions in 15 countries across five continents, delivering faster access to cloud services and addressing data residency requirements. Today over 75% of the Fortune 500 use our hybrid offerings\n</blockquote>\n<blockquote>\n Satya Nadella,CEO\n</blockquote>\n<p>Microsoft sees China as an area ripe with growth opportunities. The firm is adding four new data centers in China that should be completed in less than a year. Designed to increase service capacity across Asia, this buildout represents one of the most rapid expansions in the company’s history.</p>\n<p>A boom in data storage needs is expected in China following new regulations set to go into effect in September. A recent study forecasts China’s cloud computing industry will reach $42.3 billion by 2023, triple the market size in 2018.</p>\n<p>In 2018, with two thirds of the GDP of the US, the Chinese cloud computing market was only 8% of the equivalent market. There areestimatesthat China’s cloud computing industry will top $42.3 billion by 2023. The global forecast for cloud growth is also robust: Fortune Business Insightsforecastsgrowth from $250 billion in 2021 to over $791 billion in 2028, a 17.9% CAGR.</p>\n<p>Last of all, there is a potential growth vehicle in the company’s Augmented Reality (AR) and Virtual Reality (VR) products. While that market is still in its infancy, you can count none other than Mark Zuckerberg as one who believes it will soon change the globe.</p>\n<blockquote>\n We believe that this is going to be the successor to the mobile Internet. You're going to be able to access the Metaverse from all different devices and different levels of fidelity from apps on phones and PCs to immersive virtual and augmented reality devices.\n</blockquote>\n<blockquote>\n So, in addition to being the next generation of the Internet, the Metaverse is also going to be the next chapter for us as a company. And in the coming years, I expect people will transition from seeing us primarily as a social media company to seeing us as a Metaverse company.\n</blockquote>\n<blockquote>\n Mark Zuckerberg,Q2 2021 Earnings Call\n</blockquote>\n<p>Zuckerberg is so sold on the future of AR and VR that 20% of the company’s employees arecommittedto related projects.</p>\n<p>Although Facebook’s (FB) Oculus Quest 2 is one of the leading products in this space, Microsoft’s HoloLens 2 lands that company squarely in the midst of competition for the AR/VR market.</p>\n<p>While Facebook’s AR/VR efforts are currently trending towards entertainment applications, Microsoft’s technology is focused elsewhere. The HoloLens 2 is the winner of a $22 billion U.S. Army contract while Microsoft is also a frontrunner in business applications. For example, HoloLens devices are used by Airbus(OTCPK:EADSY)to increase productivity.</p>\n<blockquote>\n Mixed reality can help us to increase quality, safety and security. The level of human error is significantly reduced, and in aerospace, increased quality is increased safety – and needless to say, security goes with that.\n</blockquote>\n<blockquote>\n Jean-BriceDumont, executive vice president of engineering at Airbus\n</blockquote>\n<p>There areestimatesthe AR and VR market will grow at a CAGR of 46% from 2021 through 2025, reaching $162.71 billion in that time frame.</p>\n<p><b>Head-To-Head Comparisons</b></p>\n<p>The following chart provides forward-looking valuation metrics.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/171e72ff6cdab66ade34a5dc21b4f74b\" tg-width=\"577\" tg-height=\"337\" width=\"100%\" height=\"auto\"><span>Source:Seeking Alpha Premium</span></p>\n<p>Note that with one exception, Apple has the better valuation scores of the two. Apple also has a better P/E, forward P/E and PEG than the sector median.</p>\n<p><i>Advantage Apple</i></p>\n<p>The next chart provides an overview of the growth rates of each company. With the exception of the EPS ratio, the metrics reflect analysts’ two year consensus estimates.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0bba0cd7a6f848da7a3ebf9b163f52ca\" tg-width=\"576\" tg-height=\"336\" width=\"100%\" height=\"auto\"><span>Source:Seeking Alpha Premium</span></p>\n<p>Once again, Apple beats Microsoft in the majority of the measures.</p>\n<p><i>Advantage Apple by a narrow margin</i></p>\n<p><b>Dividends And Debt Compared</b></p>\n<p>Apple currently yields 0.58%. The payout ratio is 15.79% and the 5 year dividend growth rate is 9.3%.</p>\n<p>Microsoft currently yields 0.76%. The payout ratio is 25.48% and the 5 year dividend growth rate is 9.52%.</p>\n<p>Microsoft is one of only two publicly traded stocks with a AAA credit rating from S&P. Although Apple has outstanding debt metrics, MSFT is in a class (almost) by itself.</p>\n<p><i>Advantage Microsoft by a narrow margin</i></p>\n<p><b>Apple/MSFT Stock Price</b></p>\n<p>Apple shares currently trade for $150.19. The average 12 month price target of 34 analysts is $156.38.</p>\n<p>The average price target of the 19 analysts that rated the stock since the last earnings report is $163.48.</p>\n<p>That represents an 8.8% difference from the current share price.</p>\n<p>MSFT shares currently trade for $293.08. The average 12 month price target of 32 analysts is $317.88.</p>\n<p>The average price target of the 17 analysts that rated the stock since the last earnings report is $330.28, a 3.9% premium over the current share price.</p>\n<p><i>Advantage Apple, by a narrow margin</i></p>\n<p><b>Are Apple and Microsoft Overvalued?</b></p>\n<p>Although I review a variety of valuation metrics, I rely heavily on PEG ratios to determine valuations. Because there are different methods for determining ratios, I often use multiple sources for PEG metrics.</p>\n<p>For Apple, Seeking Alpha provides a 3 to 5 year PEG ratio of 1.37x. Schwab calculates the company’s PEG as 1.51x, and Yahoo gives a 5 year PEG of 2.04x</p>\n<p>Microsoft receives a 3 to 5 year PEG ratio from Seeking Alpha of 2.38. Schwab provides a 2.40x as a PEG, and Yahoo calculates a 5 year PEG of 2.69x.</p>\n<p>I can decisively state I consider Microsoft as overvalued at this juncture.</p>\n<p>Apple’s valuation is significantly better than that of Microsoft.</p>\n<p>However, both stocks are overvalued. I would wait for a pullback before investing in either name.</p>\n<p><b>Is Microsoft or Apple Stock A Better Buy?</b></p>\n<p>Both companies have fortress financial foundations, and both firms provide low yielding but rapidly growing, safe dividends.</p>\n<p>Apple’s extensive ecosystem and reputation for top ranked technology provides a level of customer satisfaction few can match. This is reflected in a survey conducted by 451 Research showing customer satisfaction levels of 97% for iPhones, 95% for iPads, and 92% for Macs.</p>\n<p>It should also be noted that when products such as Apple’s watches and AirPods are paired with devices other than the iPhone, they lose a degree of functionality. This reflects the strength of Apple’s ecosystem.</p>\n<p>As outlined in this article, Apple’s ecosystem also leads to service revenues that have very high margins.</p>\n<p>On the other hand, I see Microsoft’s growth prospects in the cloud as not only assured, but also stretching out for several years. I also believe opportunities in AR/VR arena could result in an entirely new source of robust growth for the company.</p>\n<p>Additionally, I view Microsoft’s nascent move from console-based gaming into cloud streaming as not only a potential source of robust revenue growth but also an arena that Microsoft may dominate.</p>\n<p>Consequently, I rate MSFT as the better long-term investment of the two.</p>\n<p>Do not mistake my intent. AAPL and MSFT are two of the most dynamic companies on the globe. Apple is a worthy investment, and at the moment, its valuation is better than that of MSFT. If I were forced to pick one of the two for an immediate investment, Apple’s valuation would win out.</p>\n<p>However, over the long term, and for reasons I’ve articulated throughout this thesis, I believe MSFT will provide better returns.</p>\n<p>I will add that the size of the positions I hold in the two stocks reflects this, as my MSFT position is several times that of my AAPL holdings.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Apple Vs. Microsoft Stock: Which Is The Better Buy?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nApple Vs. Microsoft Stock: Which Is The Better Buy?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-08-20 10:13 GMT+8 <a href=https://seekingalpha.com/article/4450568-apple-vs-microsoft-stock-better-buy><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nMicrosoft’s transition from console gaming to a cloud streaming format could result in a robust revenue stream.\nMicrosoft’s AR/VR products also hold hope for growth.\nApple's iPhone and other ...</p>\n\n<a href=\"https://seekingalpha.com/article/4450568-apple-vs-microsoft-stock-better-buy\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"AAPL":"苹果","MSFT":"微软"},"source_url":"https://seekingalpha.com/article/4450568-apple-vs-microsoft-stock-better-buy","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1153219714","content_text":"Summary\n\nMicrosoft’s transition from console gaming to a cloud streaming format could result in a robust revenue stream.\nMicrosoft’s AR/VR products also hold hope for growth.\nApple's iPhone and other products garner a level of customer loyalty second to none.\nApple’s ecosystem provides a competitive advantage while the services segment delivers high margins.\n\nipopba/iStock via Getty Images\nIt has been nearly a half year since I last compared an investment in Apple Inc. (AAPL) to Microsoft Corporation (MSFT). Here is an excerpt from that article,Apple Or Microsoft Stock: The Better Investment, in which I provided my conclusion.\n\n Without reservation, I rate Microsoft as the better investment of the two.\n\n\n As a value investor, I’ve been reluctant to invest in stocks with high price to earnings multiples. I mitigate my risk with high growth investments by adding incrementally to my positions when I believe a name trades near fair value. The results of my investigations for this article prompted me to increase my Microsoft position by a small percentage.\n\n\n I am not a buyer of Apple at this point.\n\nSo how did investments in Apple and Microsoft perform since that article debuted?\nMicrosoft stock is up 29.2%, Apple’s share price increased by 7.2%, and the S&P 500 climbed 16.4%.\nAlthough Microsoft and Apple are tech behemoths, many of their products are not in direct competition. Both reported double-digit revenue gains during the most recent earnings reports, and each company has areas of high growth that could continue to drive future returns.\nRecent Quarterly Results Hold Clues To Apple’s Future\n(All figures are year-over-year unless otherwise noted.)\nApple reported Q3 2021 results on July 27th. EPS of $1.30 beat analysts' estimates of $1.01 by a wide margin.\nThat was also true of revenue of $81.41 billion, up 36% year-over year.\nReviewing the company’s five segments, iPhone sales hit $39.7 billion, a surge of nearly 50%. Services revenue of $17.48 billion was up 33%, while the Other Products segment, with sales of $8.76 billion, provided growth of 40%.\nWith revenue of $8.24 billion, Mac was up 16%. iPad recorded 12% growth with revenue of $7.37 billion.\nThe company set June quarter record sales for Wearables, Home and Accessories, and for Mac.\nLuca Maestri, Apple’s CFO, provided the following guidance for Q4:\n\n We expect very strong double digit year-over-year revenue growth during the September quarter. We expect revenue growth to be lower than our June quarter year-over-year growth of 36% for three reasons.\n\nMaestri went on to list unfavorable foreign exchange rates, supply constraints, and slowing growth in the services segment as reasons to expect less robust growth in the coming quarter. He opined that services would “return to a more typical level… as certain services were significantly impacted by the COVID lockdowns a year ago. ”\nHe added that supply constraints will primarily impact iPhone and iPad.\nWhile I don’t doubt Maestri’s contention that services will slow somewhat, I think many investors fail to grasp the weight services hold in terms of both future growth and profit.\nAlthough it is true that the iPhone generates nearly half of total revenues, the hoopla associated with new iPhone launches diminishes investors’ understanding of the role services plays.\nPerusing the Q3 quarterly report provides two facts worthy of consideration: Apple’s overall gross margin was 43.3%. The services segment had a gross margin of 69.8%. While hardware provided most of the revenue, services provided an oversized share of the profits.\nPonder the following two charts.\nSource: 9TO5Mac\nThe first chart records the growth in spending on apps in the U.S. While Apple dominates the smartphone market in the States and Japan, nearly three-quarters of the globe's mobile device market share operates on an Android system. Furthermore, Google’s Play Store has 2.56 million apps versus 1.85 million on Apple’s App Store.\nEven so, Android developer shave earned $80 billion versus $155 billion paid to iOS developers over the years.\nThe next graph provides insight into the growth of Apple’s services segment over the last half decade.\nSource: Metrics Statista / chart by author\nThe data provides a record of seemingly inexorable growth. Note the increases are not dependent on new iPhone cycles.\nApple is continually rolling out new service offerings: Apple TV+, Apple Arcade, Apple News+, Apple Fitness+, iCloud+, Apple Wallet features, and the Apple One bundle are all examples of fairly recent additions to the company’s services portfolio.\nThe company now counts more than 700 million paid subscriptions across the services platform. That is an increase of more than 150 million over last year, and almost four times the number of paid subscriptions of four years ago.\nThe ubiquitous nature of smartphones has led to near saturation levels among consumers in many regions. For example, 91% of U.S. households own smartphones. Mordor Intelligence forecasts a CAGR of 11.2% for global smartphone sales for 2021-2026.\nA study by Market Data Forecast is a bit less sanguine. That firm predicts a CAGR of 6.85% from 2021-2025, with iOS growth of 7.4% during that time period.\nWhile those represent reasonable growth rates, Apple is viewed as a high growth company, and the shares are valued with investors anticipating continued robust growth. Consequently, even the 11.2% CAGR predicted by Mordor Intelligence may not be sufficient to view the stock as a favored investment.\nHowever, when one adds the service sector growth and profit margins to the equation, we may have enough to tip the scales in the company’s favor.\nAnother area that could experience slowed growth are Mac sales.\nSource:Seeking Alpha\nDaniel Research Group forecasts PC and related device's US sales will record a CAGR of 3% from 2021 through 2025, while IDC forecasts a 1.4% growth rate for global shipments of desktop and notebook PCs in 2021.\nDo not misunderstand my position. I acknowledge that the latest iteration of the iPhone has been quite successful. I would also add that the company’s move to design ARM-based chips should work to improve margins on the affected hardware. However, the saturated nature of the smartphone market could slow growth for Apple, while the services business likely has a long growth runway.\nClues In Microsoft Earnings, Too\n(All figures are year-over-year unless otherwise noted.)\nMicrosoft reported Q4 21 earnings in the last week of July.\nOverall revenue growth increased 22% to $46.2 billion. Earnings per share of $2.17 increased 49%.\nFree cash flow of $16.3 billion grew 17%, although this metric was stunted somewhat by higher capex related to the cloud business.\nProductivity and Business Processes revenue of $14.7 billion grew by 25%. Management guides for Q1 revenues for the segment of $14.5 billion to $14.75 billion from continued strength in Office Commercial and Office 365.\nOffice Commercial products and cloud services revenue increased 20%.\nIntelligent Cloud revenues surged 30% to $17.4 billion, while Azure cloud platform revenue grew by 51%. Revenue in Q1 for Intelligent Cloud is forecast at $16.40 billion to $16.65 billion. Azure growth is forecast to remain stable quarter-over-quarter.\nMore Personal Computing revenue also increased 9% to $14.1 billion. Guidance for More Personal Computing sales are $12.40 billion to $12.80 billion in Q1.\nAssuming guidance is accurate, it provides us with an interesting stat.\nIf the combined guidance for the segments proves accurate, it equates to an overall revenues of $43.3 billion to $44.2 billion for Q1 2022. This compares to Q1 2020 revenue of $37.15 billion, an approximate 18% growth in revenue at the mid range of guidance.\nThe chart below shows the annual revenue growth over the last half decade.\nSource:MSFT Investor Relations\nInvestors understandably question whether behemoths such as MSFT and Apple can continue the rapid growth rates witnessed in prior years. However. as noted above, growth for Microsoft is accelerating.\nShow Me The Growth\nInvestors can rest assured that Microsoft has growth avenues on several fronts.\nOne is Microsoft’s Dynamics 365. Like many of Microsoft’s offerings, Dynamics is shifting to a subscription model. In the latest quarterly report, management guided for revenue growth from Dynamics in the high twenty percent range.\nDynamics provides a variety of enterprise resource planning (ERP) and customer relationship management (CRM) business applications.\n\n And first of all, we're very, very excited about what's happening again with Dynamics 365. And when you ask where is the share coming and where is the growth coming? It's coming from all those (ERP and CRM) categories.\n\n\n Satya Nadella,CEO\n\nUnfortunately, it only contributes a low single-digit percentage share of total revenues; however, the CRM market is forecast to total a bit over $94 billion in 2027, with an expected CAGR of 11.3%. During the same time period, a report by Allied Market Research projects the ERP market will reach over $86 billion, with a CAGR of 9.8%.\nDevelopments related to Dynamics are to be watched for its long-term potential rather than as a source of immediate growth, due to the low percentage of revenues it currently provides.\nA second growth driver, and one with greater potential, is Microsoft’s evolution away from console based gaming to cloud streaming. The company’s Game Pass, a video game subscription service that can be used with Xbox Cloud Gaming,topped23 million subscribers last April. That marked an 8 million member increase since last September.\nGame Pass Ultimate also provides access to Android devices in addition to allowing gamers use of consoles and Windows PCs. Microsoft is also working with manufacturers to provide Xbox Game Pass through a TV app, as well as through a dedicated streaming stick.\nWith the acquisition in March of ZeniMax Media, the company moved aggressively to increase the number of video game studios under its umbrella from 15 to 23. During the Q4 earnings call, management noted Microsoft recently released 27 new games, and that Game Pass subscribers play 40% more games and spend 50% more than nonmembers.\nFortune Business Insightsforecaststhe global cloud gaming market will grow from $169.2 million to roughly $1.9 billion, a CAGR of nearly 41%, from 2021 through 2028. Forbes predicts Xbox Game Pass is likely to reach 30 million subscribers in 2021, following the release of Halo Infinite.\nSony’s answer to Xbox Game Pass, known as PlayStation Now, only had 3.2 millionsubscribersas of the end of FY 2020. Not only has the company stolen a march on Sony, Microsoft also has a significant advantage when competing for cloud based gamers.\nProject xCloud is the codename for a cloud gaming platform designed by Microsoft. Project xCloud has access to one of the largest networks of data centers on the globe. This network reduces latency (time lag) by allowing the local servicing of game requests, thereby enhancing the gamer’s experience.\nxCloud will eventually provide access to games through any device with a screen and internet connection, eliminating the need for consoles and PCs.\nRoughly a month after Microsoft closed the deal on ZeniMax gaming studios, the company moved to acquire Nuance Communications (NUAN). While largely focused on healthcare records, Nuance also has customer engagement and security solutions businesses.\nNuance and Microsoft have had a strategic alliance since 2019, and Nuance is built on Azure.Nuanceis also used by 77% of hospitals, half of physicians and three quarters of radiologists in the U.S. Although the acquisition is not expected to be accretive until 2023, it is apparent that management views the healthcare industry as a prime source of future growth.\n\n When I look at the industry cloud opportunities, we think of healthcare is a very critical opportunity for us and a huge and expansive addressable market. If you think about as a percentage of GDP, obviously, healthcare is significant. And fundamentally, when I think about the provider market, in particular, digital tech is going to play a huge role for every provider to do the things that they care the most about, which is improve the patient outcomes and reduce cost and reduce the burden on the physicians.\n\n\n Satya Nadella,CEO\n\nWhile the areas I’ve listed above show latent growth, there is little doubt that the cloud will serve to expand revenues for the foreseeable future. The company is placing so much emphasis on cloud that in the last quarterly call management stated FCF was negatively affected by cloud related capex.\n\n Over the past year we have added new data center regions in 15 countries across five continents, delivering faster access to cloud services and addressing data residency requirements. Today over 75% of the Fortune 500 use our hybrid offerings\n\n\n Satya Nadella,CEO\n\nMicrosoft sees China as an area ripe with growth opportunities. The firm is adding four new data centers in China that should be completed in less than a year. Designed to increase service capacity across Asia, this buildout represents one of the most rapid expansions in the company’s history.\nA boom in data storage needs is expected in China following new regulations set to go into effect in September. A recent study forecasts China’s cloud computing industry will reach $42.3 billion by 2023, triple the market size in 2018.\nIn 2018, with two thirds of the GDP of the US, the Chinese cloud computing market was only 8% of the equivalent market. There areestimatesthat China’s cloud computing industry will top $42.3 billion by 2023. The global forecast for cloud growth is also robust: Fortune Business Insightsforecastsgrowth from $250 billion in 2021 to over $791 billion in 2028, a 17.9% CAGR.\nLast of all, there is a potential growth vehicle in the company’s Augmented Reality (AR) and Virtual Reality (VR) products. While that market is still in its infancy, you can count none other than Mark Zuckerberg as one who believes it will soon change the globe.\n\n We believe that this is going to be the successor to the mobile Internet. You're going to be able to access the Metaverse from all different devices and different levels of fidelity from apps on phones and PCs to immersive virtual and augmented reality devices.\n\n\n So, in addition to being the next generation of the Internet, the Metaverse is also going to be the next chapter for us as a company. And in the coming years, I expect people will transition from seeing us primarily as a social media company to seeing us as a Metaverse company.\n\n\n Mark Zuckerberg,Q2 2021 Earnings Call\n\nZuckerberg is so sold on the future of AR and VR that 20% of the company’s employees arecommittedto related projects.\nAlthough Facebook’s (FB) Oculus Quest 2 is one of the leading products in this space, Microsoft’s HoloLens 2 lands that company squarely in the midst of competition for the AR/VR market.\nWhile Facebook’s AR/VR efforts are currently trending towards entertainment applications, Microsoft’s technology is focused elsewhere. The HoloLens 2 is the winner of a $22 billion U.S. Army contract while Microsoft is also a frontrunner in business applications. For example, HoloLens devices are used by Airbus(OTCPK:EADSY)to increase productivity.\n\n Mixed reality can help us to increase quality, safety and security. The level of human error is significantly reduced, and in aerospace, increased quality is increased safety – and needless to say, security goes with that.\n\n\n Jean-BriceDumont, executive vice president of engineering at Airbus\n\nThere areestimatesthe AR and VR market will grow at a CAGR of 46% from 2021 through 2025, reaching $162.71 billion in that time frame.\nHead-To-Head Comparisons\nThe following chart provides forward-looking valuation metrics.\nSource:Seeking Alpha Premium\nNote that with one exception, Apple has the better valuation scores of the two. Apple also has a better P/E, forward P/E and PEG than the sector median.\nAdvantage Apple\nThe next chart provides an overview of the growth rates of each company. With the exception of the EPS ratio, the metrics reflect analysts’ two year consensus estimates.\nSource:Seeking Alpha Premium\nOnce again, Apple beats Microsoft in the majority of the measures.\nAdvantage Apple by a narrow margin\nDividends And Debt Compared\nApple currently yields 0.58%. The payout ratio is 15.79% and the 5 year dividend growth rate is 9.3%.\nMicrosoft currently yields 0.76%. The payout ratio is 25.48% and the 5 year dividend growth rate is 9.52%.\nMicrosoft is one of only two publicly traded stocks with a AAA credit rating from S&P. Although Apple has outstanding debt metrics, MSFT is in a class (almost) by itself.\nAdvantage Microsoft by a narrow margin\nApple/MSFT Stock Price\nApple shares currently trade for $150.19. The average 12 month price target of 34 analysts is $156.38.\nThe average price target of the 19 analysts that rated the stock since the last earnings report is $163.48.\nThat represents an 8.8% difference from the current share price.\nMSFT shares currently trade for $293.08. The average 12 month price target of 32 analysts is $317.88.\nThe average price target of the 17 analysts that rated the stock since the last earnings report is $330.28, a 3.9% premium over the current share price.\nAdvantage Apple, by a narrow margin\nAre Apple and Microsoft Overvalued?\nAlthough I review a variety of valuation metrics, I rely heavily on PEG ratios to determine valuations. Because there are different methods for determining ratios, I often use multiple sources for PEG metrics.\nFor Apple, Seeking Alpha provides a 3 to 5 year PEG ratio of 1.37x. Schwab calculates the company’s PEG as 1.51x, and Yahoo gives a 5 year PEG of 2.04x\nMicrosoft receives a 3 to 5 year PEG ratio from Seeking Alpha of 2.38. Schwab provides a 2.40x as a PEG, and Yahoo calculates a 5 year PEG of 2.69x.\nI can decisively state I consider Microsoft as overvalued at this juncture.\nApple’s valuation is significantly better than that of Microsoft.\nHowever, both stocks are overvalued. I would wait for a pullback before investing in either name.\nIs Microsoft or Apple Stock A Better Buy?\nBoth companies have fortress financial foundations, and both firms provide low yielding but rapidly growing, safe dividends.\nApple’s extensive ecosystem and reputation for top ranked technology provides a level of customer satisfaction few can match. This is reflected in a survey conducted by 451 Research showing customer satisfaction levels of 97% for iPhones, 95% for iPads, and 92% for Macs.\nIt should also be noted that when products such as Apple’s watches and AirPods are paired with devices other than the iPhone, they lose a degree of functionality. This reflects the strength of Apple’s ecosystem.\nAs outlined in this article, Apple’s ecosystem also leads to service revenues that have very high margins.\nOn the other hand, I see Microsoft’s growth prospects in the cloud as not only assured, but also stretching out for several years. I also believe opportunities in AR/VR arena could result in an entirely new source of robust growth for the company.\nAdditionally, I view Microsoft’s nascent move from console-based gaming into cloud streaming as not only a potential source of robust revenue growth but also an arena that Microsoft may dominate.\nConsequently, I rate MSFT as the better long-term investment of the two.\nDo not mistake my intent. AAPL and MSFT are two of the most dynamic companies on the globe. Apple is a worthy investment, and at the moment, its valuation is better than that of MSFT. If I were forced to pick one of the two for an immediate investment, Apple’s valuation would win out.\nHowever, over the long term, and for reasons I’ve articulated throughout this thesis, I believe MSFT will provide better returns.\nI will add that the size of the positions I hold in the two stocks reflects this, as my MSFT position is several times that of my AAPL holdings.","news_type":1},"isVote":1,"tweetType":1,"viewCount":379,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":9,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/838702010"}
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