Apple (AAPL -0.15%) and NVIDIA (NVDA -0.87%) were both beloved tech stocks that lost their luster over the past year. Apple’s stock reached an all-time high of $180.96 in January, but later fell to $130. Nvidia’s stock closed at a record high of $333.41 last November, but is now trading at $160.
Both stocks declined as inflation, rising interest rates and other macro headwinds pulled investors toward more conservative investments. Both companies are also grappling with their own specific problems: Apple faced slowing sales of iPhones and supply chain disruptions, while Nvidia grappled with the post-pandemic downturn of the PC market.
Can Any of These Out-Of-Tech Stocks Bounce Back in 2023 and Beyond? let’s go review To determine their tailwinds, headwinds and valuations.
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What happened to the apple?
Apple’s revenue and earnings per share (EPS) are set to grow by 33% and 71%, respectively, in fiscal 2021 (which ends in September 2021), on the back of finally entering the 5G market with its iPhone 12 family of smartphones. after. It projects revenue and EPS growth of 8% and 9%, respectively, in fiscal 2022, despite it scrapping that launch and facing new supply chain headwinds.
For the full year, Apple’s iPhone sales grew 7% and its Mac sales grew 14% (even as the market for Windows PCs declined), while its Wearables, Home and Accessories sales grew grew 7% as it sold more Apple Watches, AirPods. and other peripheral products. Its services revenue also grew by 14% as it locked in more than 900 million paid customers across its ecosystem. All of those growth engines offset an 8% decline in iPad sales.
But FY2023 will be quite a mess. Apple’s Chief Contract Manufacturer, FoxconnApple struggled with disruptions in November as workers at its largest iPhone plant protested its COVID-19 restrictions and unpaid bonuses. Apple already slashed its annual production target for the iPhone 14 Pro and Pro Max from 90 million to 87 million units to account for those challenges, but future protests could generate more unexpected headwinds for Apple. can do.
Yet Apple still ended fiscal year 2022 with $169 billion in cash and marketable securities, and it bought back a whopping $550 million in shares over the past decade. That strong liquidity should make Apple an attractive investment as long as rising rates keep crushing unprofitable companies with weak cash flows. Apple is also expected to launch a new “mixed reality” headset next year — and that product could generate a new stream of hardware revenue.
Based on those expectations, analysts expect Apple’s revenue and earnings to grow 3% and 2%, respectively, this year. Those growth rates are steady, but at 22 times forward earnings, Apple’s stock isn’t cheap right now.
What happened to nvidia?
According to JPR, Nvidia will control 88% of the discrete GPU market in the third quarter of 2022. The remaining 12% was divided between Advanced Micro Devices And intel,
Its revenue and adjusted EPS grow by 53% and 73%, respectively, in FY2021 (which ends in January 2021). In FY22, its revenue soared 61% as its adjusted EPS grew 78%.
Much of that growth was driven by three tailwinds:
- PC sales skyrocketed during the pandemic as more people worked remotely, attended online classes and played more PC games.
- Growing interest in mining cryptocurrencies with gaming GPUs.
- Use of more powerful GPUs in data centers to process complex machine learning and AI tasks.
But in fiscal 2023, analysts expect its revenue to be flat and its EPS to decline by 27%. The slump was caused by the post-pandemic slowdown of the PC market, sluggish sales in China amid the COVID-19 lockdown and strict gaming restrictions, and the decline of the crypto market all of which offset strong sales of data center GPUs. The Biden administration’s ban on advanced chip sales to China, which affects its top-tier data center chips, will add to that slump.
For fiscal 2024, analysts expect Nvidia’s revenue and earnings to grow by 9% and 32%, respectively, as those markets gradually stabilize. But at 38 times forward earnings, Nvidia’s stock is still a bit expensive relative to its near-term growth.
But like Apple, Nvidia still has plenty of cash to spare. It ended its latest quarter with $2.8 billion in cash and equivalents, and it bought back $8.8 billion in shares over the first three quarters of fiscal 2023. This ample liquidity gives it plenty of room to develop new chips, expand into new markets, and make acquisitions. Smaller companies — even though antitrust regulators killed its proposed $40 billion acquisition softbankArm Holdings earlier this year.
Clear Winner: Apple
Apple faces a near-term downturn, but its business is much better diversified and less cyclical than Nvidia’s. It’s also sitting on a lot more cash, its stock is cheaper, and it arguably has more options for expanding its portfolio of products and services than Nvidia. Therefore, I firmly believe that Apple is a better buy than Nvidia in this challenging market for tech stocks.
Leo Sun holds positions in Apple. The Motley Fool holds positions in and recommends Advanced Micro Devices, Apple, Intel, Nvidia and SoftBank Group. The Motley Fool recommends the following options: long January 2023 $57.50 call on Intel, long January 2025 $45 call on Intel, long March 2023 $120 call on Apple, short January 2025 $45 put on Intel, and short March 2023 $130 call on Apple . The Motley Fool has a disclosure policy.
