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Apple Vs. Microsoft: Which One Are You?

|Includes: Apple Inc. (AAPL), MSFT

Summary

Apple beats Microsoft in terms of the Fundamental analysis due to its strong ratios related to earnings, profitability, and sales.

Microsoft outperforms Apple in terms of the Technical analysis due to the indicators related to the stock’s momentum.

Microsoft defeats Apple in terms of Social Measures as Wall Street analysts, who favor Microsoft over Apple, and the company gets a lot of positive news sentiment.

Apple vs. Microsoft: Which One Are You?

Do you use Apple or Microsoft? The answer to that question has become less about the technology and more about culture and self-identification. Advertisements in recent years have even typecast the sides as the Microsoft user with a pocket protector and the hipster Apple user. Choosing between Apple and Microsoft is a statement about who you are and what you believe about the world. Although the two companies develop the software that runs the world, in many ways their business lines have diverged over the years. So, if you are considering whether to invest in Apple or Microsoft, it pays to remove yourself from the philosophical choice about who you are and what you represent. Instead, it’s best to focus on the data about the companies and their potential future returns. The StockMetrix app is a great tool for analyzing all of the data about these two tech giants.

Fundamental Analysis: Apple Defeats Microsoft

The winner of the fundamental analysis showdown is Apple. StockMetrix evaluates 32 different fundamental indicators, and Apple beats Microsoft 17-12. Apple wins in 17 categories, Microsoft wins in 12 categories, and it’s a draw in the remaining categories. Apple is incredibly strong and has the highest StockMetrix rating of 10 for ratios related to earnings, profitability, and sales. In particular, Apple outperforms Microsoft when it comes to measures like return on assets, return on equity, earnings per share ratio, net profit margin, receivables turnover, and inventory turnover. These results should not come as a surprise since strong sales numbers and large cash holdings have become hallmarks of Apple’s financial model. In fact, Apple’s first quarter sales were triple the comparable quarterly sales for Microsoft.

Microsoft does come out ahead of Apple in a few key areas. Since Apple chooses to retain its earnings as cash rather than pay out dividends to shareholders, Microsoft wins in these categories. In addition, Microsoft wins in all ratios where stock price is related to some measure of earnings and assets. These metrics include price to earnings, price to book, price to cash flow, and others.

Technical Analysis: Microsoft Defeats Apple

After evaluating 35 different technical analysis measures on the Stock Metrix app, Microsoft is the clear winner in 22 categories. Microsoft exhibits the most positive signals using technical indicators related to the stock’s momentum. For example, the Moving Average Convergence/Divergence (MACD) shows that the short-run exponential moving average is increasing relative to the long-run moving average. The Percentage Price Oscillator also measures the short-run versus long-run price momentum and has similar positive signals. On the other hand, Apple does have slightly more positive momentum signals using stochastic oscillators. Both the stochastic oscillator and stochastic RSI utilize a high-low price range for a set period of time rather than a moving average.

Social Measures: Microsoft Defeats Apple

Apple is winning the social media war, but Microsoft beats Apple in all other social analysis categories. Wall Street analysts favor Microsoft. Around 75% of analysts rated Microsoft as a strong buy. On the other hand, only around half of analysts rated Apple as a strong buy while most of the other analysts rated Apple as a hold.

News sentiment measures the number of times a particular stock is mentioned by news media and considers whether the mentions were positive, negative, or neutral. During the past week, Microsoft announced its plans to revitalize its presence in the gaming space. The company plans to expand its Game Pass subscription service and to build a new cloud-based platform that will allow users to play games with anyone, anywhere regardless of their device. The next version of the Xbox One is already designed, but Microsoft plans to capitalize on a strategy of creating strong gaming franchises and generating cash flows across multiple consoles. The markets and news sentiment are positive on this console-independent game market strategy.

Conclusions

The winner is….Microsoft. Beating out Apple in both the technical analysis and social sentiment categories, Microsoft is the winner in the head-to-head battle against Apple. Microsoft is trading near its 52-week high, but momentum indicators and recent news announcements could push the stock price over this threshold. Even as the stock price moves higher, however, Microsoft is still more affordable than Apple according to P/E, P/B, and P/CF ratios.

Even though Microsoft won this showdown with Apple, it doesn’t mean that Apple is not a good stock to own. The fundamental indicators all showed that Apple is a solid investment. Apple’s revenue, profit margin, and financial position remain strong every quarter. There is no doubt that Apple an innovative and successful company. It seems that Apple mainly falls behind Microsoft in this analysis due to its high stock price. The high stock price makes Apple look bad in ratios that consider its price, and analysts worried that it may be overpriced won’t rate the stock as a buy. Investors, however, don’t seem to be bothered by the price and continue to trade in a way that shows their confidence in Apple’s future performance. Apple is also trading near its 52-week high.

Disclosure:

I have no interest in any stocks mentioned, and no holdings in those companies. This article presents only my opinions. I am not receiving compensation for it. I am not in any way associated with any company mentioned in this article.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.