Apple vs. Amazon: Going Their Separate Ways

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 |  Includes: AAPL, AMZN
by: Bespoke Investment Group

After going head to head with Google (NASDAQ:GOOG) on a number of issues in 2010, it looks like 2011 will be a year where AAPL finds itself clashing heads with Amazon.com (NASDAQ:AMZN). In the last week alone, AMZN has launched its own version of an app store for the Android operating system, and then in the last couple of days the company introduced its 'cloud drive locker' which will compete with iTunes and let users store media libraries (including music) on the cloud and then access them on any internet connected device. Now there is even talk that AMZN is going to introduce its own version of a tablet computer.

The big question with each of these issues is whether or not any of them will matter. For years, we have been hearing of potential iPod, iPhone, and iPad killers and so far none of them have materially hurt AAPL's stock. However, if we look at AAPL's performance relative to AMZN, AMZN has recently been gaining some ground. The chart below compares the relative strength of AAPL and AMZN over the last year. When the line is rising, shares of AAPL are outperforming AMZN, and vice versa when the line is falling.

Over the last year, AAPL's relative strength peaked versus AMZN last May, and the stock steadily underperformed AMZN up until late 2010. At that point, though, AAPL retook the lead and maintained that lead up until the middle of this month. Coincidentally, the recent peak was the time at which talk of some of AMZN's recent initiatives started to leak. While it has only been a couple of weeks, the performance of AAPL's stock relative to AMZN seems to have been affected by some of AMZN's recent initiatives. On top of that, today AMZN is rallying and is now trading above its 50-day moving average, while AAPL is down and trading below its 50-day moving average.

Interestingly, even sentiment on AAPL has turned less positive. Believe it or not, an analyst actually lowered earnings estimates on the stock today. When was the last time that happened? Furthermore, when we asked readers this morning whether or not AAPL's stock would be higher or lower one month from now, more of you (53%) see the stock trading lower. Not too long ago, it was hard to find anyone who didn't think the stock was going anywhere but up.

Click to enlarge