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Today I want to talk about two giant tech innovators that have just become competitors. Apple (AAPL) and Zoom Video Communications (ZM) weren't competing directly until the lastest product launch by Zoom. Now, the question is which one is a better buy, and why?
This is Sailesh Tirupasur. I'm a part of Stock Card's summer internship program in 2020, and this post is a part of my Stock Battle series. I don't own these two stocks, and my goal here is to study them to decide whether to invest or not.
These stocks are apart of our Companies Shaping the Future stock list. If you want to see other stocks in this category, click here.
Stock research and analysis:
Apple (AAPL) is a mature brand in an established but growing market. According to the company's Stock Card, the consumer electronics market is set to grow by almost 9% annually. The tech giant tops $267 billion in yearly revenues and even posted an impressive 9% topline growth in its annual report last year before the pandemic. With COVID-19 slowing sales, though, its most recent quarter's year-over-year growth was only 0.5%. Analysts estimate Apple's full-year gains to come in just above 1%. While Apple is one of the premier blue-chip stocks, there are still risks associated with the company. A slowdown in the smartphone market's growth could be exponentially painful since over half its current revenue comes from its iPhone products. Moreover, Apple relies on its device owners' base to grow its other revenue segments, such as financial services and content. It is paramount to Apple to maintain and slowly increase its device owners' base.
Zoom Video Communications (ZM), founded in 2011, is a video communication platform that has skyrocketed in recent months due to the COVID-19 pandemic. Zoom is a small upstart that's posting massive growth in the number of users. The pandemic has strengthened the video platform's most recent quarter's revenues to a massive 169% year-over-year growth. The full year outlook of the company is set to top $1.7 billion, which is almost a 200% increase from the previous year. Rather obvious risk of investing in Zoom now is its high stock price thanks to the seemingly unstoppable stock price rally since the start of the pandemic.
The interesting new development in this market is the launch of Zoom's iPad's lookalike. The company just announced a hardware device for home videoconferencing, not too, unlike Apple's iPad. On the one hand, I applaud the company's bold move in the hardware market. On the other hand, I'm pausing to ask whether Zoom believes its growth rate in the video communication software has reached maturity this fast that it would need to launch a hardware product to continue to grow. Perhaps the rapid growth due to the pandemic accelerated the adoption of video conferencing by businesses and schools, and Zoom might have already reached its peak.
The choice between these two depends on your investment style. If you are looking for a very established low-risk stock, then Apple would be a solid buy. If you are looking for the chance for a more highly valued growth stock with more risk attached, then Zoom would be a great pick. I would choose Zoom due to its massive potential for growth and high returns.