by James Brumley | November 26, 2013 8:35 am
The title of best tech stock was once held by Apple (AAPL) — hands down. But the days of sheer dominance for AAPL appear to be over, while Amazon (AMZN) and Google (GOOG) have become the two names to beat.
And make no mistake … technology is once again proverbially “where it’s at,” and Google and Amazon are leading that charge. GOOG stock up 48% for the year so far, while AMZN is up 50% since the end of 2012.
Heck, AMZN and GOOG are each up a whopping 19% just since the end of September. That’s about as much as any short-term trader or a long-term investor could hope for.
Still, the question remains whether GOOG or AMZN is the best tech stock to buy heading into the new year.
With that in mind, let’s take a look at what each of these tech titans has to offer — and which of the stocks steals the top-investment crown.
While it’s become cliche to describe a company as a juggernaut, the word fits the bill for Google. GOOG stock has been stellar because the company has logged more than a decade’s worth of annual increases in revenue and earnings.
Despite occasional setbacks and questionable tactics, you can’t argue with that kind of consistent growth. It was first fueled by web search, then online apps, and most recently, Android. GOOG is hardly out of growth ideas, however.
It may have seemed silly at first, but now that the concept of Google Glass has had some time to simmer, there may be a real revenue opportunity here. And not because GOOG says so, but because third-party developers and entrepreneurs are already seeing ways to capitalize on the technology.
Google Glass-powered products could serve as a virtual golf caddy, translate foreign languages, act as a compass or provide a stopwatch … just to name a few. It’s still more sci-fi and frivolous than some technology fans might care to use, but it looks like GOOG understands Google Glass has to be practical to be marketable.
Investors can afford to be compelled by that potential, and by GOOG stock.
With a forward-looking P/E ratio of 141, Amazon stock isn’t even close to winning any value awards. Then again, an alarmingly-high valuation hasn’t held AMZN stock back.
Shares of Amazon stock haven’t been priced below a P/E of 50 since mid-2009, but AMZN shareholders have enjoyed a stunning 340% appreciation since then … making it one of the best tech stocks for that period. Point being, Amazon has been able to shrug off a ridiculous valuation that investors wouldn’t tolerate with many other names.
AMZN stock shareholders aren’t apt to see margins widen or profits improve anytime soon either, as Amazon.com is aiming to deepen its connection with consumers’ daily lives … and that’s not happening for free.
The latest venture is grocery deliveries, via a sub-site called Amazon Fresh. The service is only being piloted in a small number of locales now, but so far the reviews have been generally positive. While it’s unlikely the grocery business itself will turn into a cash cow, the service will draw more users to Amazon’s websites where they may end up buying something more profitable for the world’s largest online retailer.
While both GOOG stock and AMZN stock could be considered among the best tech stocks to own heading into 2014, only one can be king. And the simple truth is that Google is superior to Amazon.com as an investment right now.
While the frothy P/E ratios of AMZN stock have become well-known for not yet being a problem for investors, the company has been spending heavily over the past three quarters in order to foster growth. Its already-thin margins have been whittled down to practically nothing as a result.
Amazon stock analysts expect the big capital expenditures to slow heading into the coming year, but they didn’t exactly see the full extent of 2013’s spending at this time of the year in 2012 either. Plus, there’s no clear plan on how, or even if, Amazon Fresh will ultimately draw new customers to Amazon’s non-grocery business.
Google, on the other hand, is not only a growth machine … but you don’t have to pay an arm and a leg to tap into that growth trend. GOOG stock currently boasts a trailing P/E of 29, and a forward-looking one of 20. Better still, the company has a budding revenue catalyst in Google Glass that it doesn’t even necessarily need — ongoing advent of Android alone could be enough to fuel several years’ worth of growth. Google Glass is just gravy.
That makes GOOG stock the best tech stock out there at this stage in the game.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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