Amazon (AMZN) and Alphabet (GOOG) are two of the world’s most recognizable brands and Wall Street’s most coveted stocks, and the long-term trajectory of each blue-chip stock is still decidedly up. Plus, it’s estimated that roughly 40% of all web traffic is hosted by those two companies combined. But which looks like the better buy today, AMZN stock or GOOG stock?
Both stocks were beaten down by the growth stock sell-off of 2022 but have bounced back impressively since. GOOG has risen 99% since the start of 2023 vs. AMZN’s 168% gain. Over the last five years, GOOG is up 163% vs. a 157% gain in AMZN.
Those are particularly strong returns for GOOG, especially when compared to the 93% return in the S&P 500 in the last five years. Now the question is: Can AMZN and GOOG repeat or beat that performance over the next five years?
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It would be foolish to doubt either company at this point. That said, no stock continues to grow at a breakneck pace forever. Just ask anyone who bought General Electric (GE) 20 years ago, when it ranked among the 10 largest companies in the world by market cap. (Its 20-year returns just flipped positive this summer before the company split up and rendered subsequent comparisons moot.) So chances are, one or both of these blue-chip tech stocks will start to slow in the years ahead.
Given that backdrop, I thought it might be a fun exercise to examine which tech giant stock is better positioned for future growth.
Here’s a closer look at AMZN stock and GOOG stock, broken into a few key numbers:
Tale of the Tape: AMZN Stock vs. GOOG Stock
Trailing P/Es: AMZN 47, GOOG 23
Forward P/Es: AMZN 36, GOOG 20
Estimated 2025 revenue growth: AMZN 10.8%, GOOG 11.6%
Estimated 2025 EPS growth: AMZN 20.1%, GOOG 12.2%
Cash per share: AMZN $8.37, GOOG $7.62
Institutional ownership: AMZN 64%, GOOG 62%
That comparison tells us that AMZN is still the more overvalued stock. However, until recently it had been the faster-growing company on both the top and bottom lines; and it had been since 2016. That was also the year Amazon first turned consistently profitable.
That said, Alphabet has a touch more cash on hand (about $93 billion compared to Amazon’s $88 billion), with roughly a fifth as much debt. Considering that Amazon brings in nearly twice as much revenue as Alphabet annually (though that gap is closing), that means that Amazon has been way more willing to spend its cash on things that will grow the company - the Amazon Prime Video streaming service that is rivaling Netflix these days; a new foray into live sports with NFL broadcasts; the Amazon Echo, Amazon Web Services, etc. Alphabet looks more like a cash hoarder. The result is that Amazon stock has grown much faster than GOOG stock in the last decade, though that has certainly changed in the last few years.
The guess here is that Alphabet will start loosening its purse strings in the coming years, devoting it to new, exciting products. Regardless of what it comes up with, bet on Alphabet spending more of its $93 billion cash stockpile soon. If it does, that could capture investors’ attention the way Amazon did up until the last few years.
GOOG Has More Upside Potential
You can’t go wrong with either of these growth stocks. If you bought both of them five, 10 or even 15 years ago, you’ve made a LOT of money. But AMZN has been the better performer, at least up until recently. I think that might change in the years to come. Between its cash stockpile, untapped potential revenue streams, and cheaper valuation, I like GOOG stock to outperform AMZN in the next five years. In fact, that shift already seems to be taking place, as the last five years have shown. It could be the start of a longer-term role reversal between two of the biggest, baddest tech stocks on the block.
Given the state of the current bull market, you could buy both (or either, although I prefer GOOG); either way, an investment in GOOG stock will likely turn out quite well five years from now.
For a list of the stocks that have the strongest momentum to end the year, consider taking a trial subscription to Cabot Top Ten Trader. In it, you’ll find the list of 10 stocks that are set to close out the year strong.
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*This article is periodically updated to reflect market conditions
