FB vs. AMZN: Which Technology Stock Is a Better Buy?
Technology stocks continue to attract growth
investors as they have the ability to increase revenue and earnings
at a faster pace compared to the broader market. In the last
decade, tech stocks have been on an absolute tear easily outpacing
the S&P 500. While the equity markets are trading near
record highs due to the stellar rally in tech companies, investors
might be worried about steep valuations and the possibility of a
However, it remains impossible to time the
market which means investors should instead follow a disciplined
strategy and keep investing in blue-chip companies as well as
benefit from dollar-cost averaging and the power of compounding.
Here, we take a look at two tech giants Facebook (NASDAQ: FB) and
Amazon (NASDAQ: AMZN)
to see which is a better bet right now.
FB stock is trading at a
Facebook is one of the largest companies in
the world and is valued at a market cap of $936 billion. However,
it still has enough room to gain momentum in 2021 and derive
outsized gains to investors.
In Q1 of 2021, Facebook’s
sales were up 48% year over year at $26.2 billion while
operating income almost doubled to $11.4 billion. Its adjusted
earnings per share stood at $3.30 significantly higher than
consensus estimates of $2.37 per share. FB also beat Wall Street
revenue estimates of $23.7 billion in Q1.
Facebook is the largest social media platform
in the world and the second-largest digital ad platform as well. As
the global economies reopen enterprise ad spending should move
higher which will be a key driver of revenue growth for
Further, the company is also gaining traction
in emerging technologies such as virtual reality and augmented
reality. FB CEO Mark Zuckerberg believes this business has reached
an inflection point in terms of sales. For example, Oculus
generates a majority of Facebook’s “other” category sales and
experienced revenue growth of 146% year over year in Q1.
FB stock is trading at a forward price to
sales multiple of 8.13x and a price to earnings multiple of 25.1x.
However, analysts expect its earnings to rise at an annual rate of
23.7% in the next five years.
AMZN leads multiple
Amazon is another stock that has crushed
peers in the last 10 years. Since June 2011, AMZN stock is up a
staggering 1,470%. It means $1,000 invested in AMZN stock 10 years
back would be worth close to $15,000 today. While Amazon is the
largest e-commerce player in the world, it also leads the public
cloud market and is the third-largest digital ad platform as well.
Further, it occupies the pole position in growth verticals such as
online content and game streaming.
Amazon recently pumped in $8.5 billion to
acquire MGM which is one of the largest studios in Hollywood. This
acquisition will help the company access a vast library of content
titles and move the needle in terms of streaming sales.
The COVID-19 pandemic acted as a meaningful
tailwind for Amazon as the company experienced
accelerated growth rates in multiple businesses. Analysts
expect AMZN to increase its sales by 27% to $491 billion in 2021
and by 18.6% to $582 billion in 2022. Comparatively, its earnings
are forecast to grow at an annual rate of 38% in the next five
We can see that both AMZN and FB are
companies growing at a rapid clip. However, Amazon has a more
diversified business compared to Facebook making it a better bet
especially during economic downturns. AMZN stock is also trading at
a higher discount compared to Wall Street’s price target
Analysts expect AMZN
stock to touch $4,245 in the next 12-months which is 32% above
its current trading price. Comparatively, FB stock is trading at a
discount of 17% to analyst estimates.
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