Apple (AAPL) vs. Amazon (AMZN): Battle of the Titans

NEW YORK (TheStreet) -- Apple (AAPL) is set to have a very, merry Christmas, while Amazon (AMZN) has its drones (no kidding, it actually has drones!), but which wins out in TheStreet's ratings battle?

Buy Amazon? Yes and No

Jim Cramer fielded a question from an investor on Monday morning, asking whether he would buy Amazon and whether it was worth $400. Cramer's answer? Yes and no.

Writing on TheStreet's premium site Real Money, Cramer said, "You can buy Amazon, the stock, because you recognize that this company will stop at nothing to bring you the best goods at the cheapest prices in a way that you don't have to do a thing about."

But is it worth $400, merely 2% higher than what it is currently trading at?

"By any traditional metric, the answer to this question is: absolutely not," wrote Cramer.

But Amazon isn't your traditional company. As Cramer puts it, it's a high-momentum play on a company that is expanding rapidly, and cares little as to whether it's raking in the dough or hemorrhaging money. In short, it's worth what people will pay for it. After Goldman Sachs upped its price target to $450 from $400 on Monday, the stock is sure to be in demand.

As TheStreet Ratings team puts it, Amazon is one to hold onto for the time being. The team reiterated its "hold" rating with a score of C.

"We rate Amazon.com Inc (AMZN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 23.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $1,389 million or 47.29% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 36.42%.
  • Powered by its strong earnings growth of 85% and other important driving factors, this stock has surged by 58.87% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Internet & Catalog Retail industry average, but is greater than that of the S&P 500. The net income increased by 85% when compared to the same quarter one year prior, rising from -$274 million to -$41 million.
  • The gross profit margin for Amazon.com Inc is currently lower than what is desirable, coming in at 32.53%. Regardless of AMZN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.23% trails the industry average.

Apple's a No Brainer

Ever the favorite stock, TheStreet retains its "buy" rating on Apple Inc with a score of A+. And with four new products in its portfolio (the iPhone 5s, iPhone 5c, iPad Air and iPad mini with Retina Display) in time for the holiday shopping season, Apple is on track to have a solid fourth quarter. As TheStreet's Rocco Pendola puts it, "Apple crushes the competition every day, all day."

TheStreet Ratings Team has this to say about their recommendation:

"We rate Apple Inc (AAPL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AAPL's revenue growth has slightly outpaced the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although AAPL's debt-to-equity ratio of 0.14 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.40, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has slightly increased to $9,908 million or 8.45% when compared to the same quarter last year. In addition, Apple Inc has also modestly surpassed the industry average cash flow growth rate of 6.93%.
  • 41.78% is the gross profit margin for Apple Inc which we consider to be strong. Regardless of AAPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AAPL's net profit margin of 20.04% compares favorably to the industry average.
  • Apple Inc's earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, Apple Inc reported lower earnings of $39.63 a share vs. $44.16 a share in the prior year. This year, the market expects an improvement in earnings ($43.46 vs. $39.63).

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