- Amazon and Alphabet both beat expectations on earnings but missed on revenue, prompting stocks to fall on Friday, Oct. 26.
- Amazon is showing impressive growth in profits and a better value based on its revenue.
- Alphabet has less debt and better value based on earnings.
Two of the largest companies in the world reported earnings on Thursday, Oct. 25, with both outdoing expectations on earnings but disappointing on revenue and then shedding value during the trading day.
Amazon reported profits of $5.75 per share against $3.14 expected by analysts polled by Refinitiv. But that gain was overshadowed by the $56.6 billion in revenue that fell short of the $57.1 billion anticipated, which had shares falling 7.82 percent on Friday.
Alphabet, Google’s parent company, had a similar story, beating expectations on profits to the tune of $13.06 per share against $10.42 expected, but doing so on $33.7 billion in sales against expectations of $34.04 billion. It then shed 1.8 percent of its value during Friday’s session.
So, as two of the four most valuable companies in the world, which of these mega-cap stocks is going to be better for your portfolio?
Amazon vs. Alphabet Stock Comparison
Here’s a basic comparison of Amazon and Alphabet stock:
|Market Cap||$801.27 billion||$750.5 billion|
|Most Recent FY Revenue||$177.9 billion||$110.9 billion|
|Most Recent FY Profits||$3 billion||$12.7 billion|
|Most Recent FY Revenue Growth||30.8%||22.8%|
|Most Recent FY Profit Growth||27.92%||-34.99%|
|GOBankingRates’ Evaluation||$107.9 billion||$279.3 billion|
|Stock Gain/Loss Last Month||-16.80%||-9.23%|
|Stock Gain/Loss Last Year||68.86%||9.31%|
|All market data accurate as of market close on Oct. 26, 2018.|
Why You Might Pick Amazon Stock:
- Amazon is clearly the better value when gauged by total revenue, with a P/S ratio of 3.85 to Alphabet’s 6.06.
- Amazon’s rapid growth in profitability is impressive, with the company posting an FY loss as recently as 2014 ($241 million in the red), only to swing all the way to over $3 billion in earnings last year.
- Amazon’s return on equity is much stronger at 21.56 percent compared to Alphabet’s 10.51 percent, indicating that Amazon could be more efficient in how it deploys its resources.
Why You Might Pick Alphabet Stock:
- When gauged by profits, Alphabet suddenly becomes the stronger value play with a P/E ratio of 46.8 to Amazon’s massive 130.1.
- Alphabet’s return on assets is at 9.71 percent to Amazon’s 4.16, potentially indicating that Amazon’s better return on equity is as much a function of its larger debt load than anything else.
- And speaking of debt, Alphabet has much less, owing just $44.8 billion for total shareholder equity of $152.5 billion compared to Amazon’s $103.6 billion in liabilities — and just $27.7 billion in shareholder equity.
The Final Word on Amazon Stock vs. Alphabet Stock
Alphabet is the more stable company that’s posting stronger profits and has less debt, making it more attractive as a company with loads of assets and a strong income stream. That could change in the long run, however, if Amazon can keep growing its profitability at its current rate.
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