The new year is here, and there are plenty of reasons to be bullish about the next 12 months. 2023 had a tricky start, coming out of a year where the Nasdaq Composite had plunged 33% amid macroeconomic headwinds. However, the situation is much more positive as we begin 2024. In 2023, the Nasdaq Composite rose 43%, fueled by easing inflation and excitement over burgeoning sectors such as artificial intelligence (AI). The market will probably continue trending up in the coming months, with now an excellent time to consider investing in companies set up to flourish this year and beyond.
As titans of their respective industries, Amazon (NASDAQ: AMZN) and Apple (NASDAQ: AAPL) are two attractive growth stocks with exciting developments in 2024. Amazon has posted multiple quarters of surging growth in its retail business, while Apple will launch its highly anticipated virtual/augmented reality (VR/AR) headset. So let’s look at whether Amazon or Apple is the better growth stock in 2024.
Amazon: A Remarkable Turnaround
Amazon has delivered an impressive comeback over the past 12 months after suffering steep declines in its e-commerce business in 2022. In its latest quarter, the third quarter of 2023, the company posted 13% year-over-year revenue growth, beating Wall Street forecasts by $1.5 billion. Meanwhile, its North American segment exceeded $4 billion in operating income, significantly improving on the $412 million in losses it reported in the year-ago period. The tech giant owes much of its growth over the past year to various cost-cutting moves, such as closing or canceling construction on dozens of warehouses, shuttering unprofitable programs such as Amazon Care, and laying off thousands of people. The restructuring saw Amazon’s free cash flow rise 427% over the past year to $17 billion. As a result, the company is starting 2024 in excellent form. With lower expenses, it has the funds to fuel its R&D as it continues to expand in AI and overcome potential headwinds. Amazon is leading two crucial markets with its e-commerce and cloud computing services, with its business likely to deliver significant gains for years.
Apple: Weathering the Storm
Apple didn’t have it as easy as Amazon in 2023, as an economic downturn led to consumer pullback and repeated declines in its product sales. For the fiscal year, the company’s revenue fell 3% year over year after its highest earnings segment, the iPhone, saw revenue tumble 2% alongside dips in Mac, iPad, and wearable sales. However, there’s reason to believe the current challenges are only temporary, meaning it’s still worth investing in Apple. The company has built immense brand loyalty with its users, which resulted in the third largest market share in e-commerce in the U.S. despite offering a significantly fewer products compared to industry leaders Amazon and Walmart. The popularity of Apple’s products bodes well for its soon-to-be-launched Vision Pro, its first VR/AR headset, which will hit the shelves in 2024. Data from Fortune Business Insights shows the VR market on its own is projected to expand at a compound annual growth rate of 31% until at least 2030. Meanwhile, Apple has a reputation for entering new markets and quickly rising to dominance, attracting consumers with its focus on quality, connectivity between its devices, and easy-to-use design language. Apple hit nearly $100 billion in free cash flow in 2023. Alongside a highly lucrative digital services business, the company remains an attractive growth stock for the new year.
Choosing the Winner
Amazon and Apple dominate their respective industries and are unlikely to be dethroned anytime soon. They have long histories of delivering consistent and significant gains, making them some of the best growth stocks out there. However, just because a company is leading an industry, that doesn’t necessarily mean it’s trading at the right price. This chart compares both companies’ price-to-sales (P/S) ratios, with Amazon’s lower figure suggesting its shares are currently the better value. P/S is calculated by dividing a company’s total market cap by its trailing-12-month revenue. As a result, Amazon’s solid performance and financial growth have made it the better growth stock and set it up to be an excellent investment for 2024.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Walmart. The Motley Fool has a disclosure policy.
