Apple (AAPL) stock, which initially lagged behind some of its Big Tech peers in 2024, has recently regained momentum, increasing by about 17.6% over the past three months. Conversely, Alphabet (GOOGL) has encountered a rough patch, with its stock declining by approximately 7.1% during the same period.
Nonetheless, shares of these tech giants have maintained their overall upward trajectory into 2024, posting impressive gains so far. Apple stock has jumped 16.6% year-to-date, while Alphabet has climbed even higher with a 17.3% increase.
With both companies exhibiting strengths in innovation and market leadership, let’s explore which of these Big Tech stocks is a buy now.
Apple Stock: Key Factors to Consider
The recent momentum in Apple stock has been primarily driven by its focus on integrating generative artificial intelligence (AI) technology into its products. Despite facing softness in iPhone revenue, Apple’s initiatives in AI are positioning it for future growth. In Q3 of fiscal 2024, iPhone revenue fell 1% year-over-year to $39.3 billion, but Apple’s AI-driven features are expected to drive device upgrades and attract new users.
Apple’s AI initiatives, including the introduction of Apple Intelligence and its partnership with ChatGPT, open up new avenues for monetization and future revenue growth. This will likely accelerate the growth of its Services division, which reached a record $24.2 billion in revenue in Q3. Device upgrades and higher product volumes will likely expand the installed base of active devices, driving Services revenue. As Apple integrates AI into its ecosystem, customer engagement and revenue from the Services segment are expected to rise further.
Apple is also committed to returning substantial capital to shareholders. After distributing over $27 billion in Q2 2024 through dividends and share buybacks, Apple returned over $32 billion to shareholders in Q3. Investors can expect further returns via increased dividends and more aggressive share repurchase programs.
While Apple is well-positioned to benefit from its innovation in consumer electronics and services, increased competition in China and macro headwinds pose challenges. This is reflected in analysts’ consensus rating of “Moderate Buy.”
The average price target for Apple stock is $241.68, indicating a modest potential upside of about 7.6% from recent levels.
Alphabet Stock: Key Points to Consider
Alphabet’s leadership in digital advertising and cloud computing underscores its potential to deliver solid growth. The resilience of its business in the face of macroeconomic uncertainty is evident in the impressive growth of its advertising revenue. Google’s ad revenue increased at a double-digit rate over the past three consecutive quarters, driven by its leadership in Search and ongoing strength in its YouTube platform.
In Q2, Google's Search revenue jumped by 14% year-over-year to reach $48.5 billion, driven by innovations in AI-powered search functionalities that enhance user engagement. Concurrently, YouTube’s advertising revenue expanded by 13%, benefiting from increased viewer engagement and enhanced monetization strategies, primarily through YouTube Shorts.
Alphabet’s advertising revenue is poised for further growth, bolstered by upcoming revenue-driving events such as the U.S. elections. Further, integrating AI-driven enhancements and new advertising features will likely accelerate the revenue growth rate.
Beyond advertising, Alphabet’s strategic focus on cloud computing continues to yield substantial results, with its Cloud division surpassing $10 billion in quarterly revenue for the first time in Q2. This reflects its progress in leveraging AI technologies and introducing generative AI solutions, which have significantly bolstered demand from enterprise customers.
Alphabet’s AI infrastructure and generative AI solutions for Cloud customers are driving stellar demand, generating billions in revenues year-to-date. Further, its aggressive investments in AI and strategic partnerships are expected to fuel further growth in its Cloud business.
Alphabet is also returning substantial cash to shareholders, repurchasing shares worth $31.7 billion in the first half of the year. The company still has $74.9 billion available under its buyback program. This indicates that it will continue to enhance its shareholders’ value through buybacks.
Analysts remain optimistic about Alphabet, as its dominance in digital advertising and its AI-led growth in cloud services offer significant long-term potential. GOOGL has a consensus rating of “Strong Buy.”
The average price target for Alphabet stock is $204.71, indicating a potential upside of about 25% from recent levels.
Conclusion: Apple or Alphabet?
Both Apple and Alphabet present compelling investment opportunities with strong fundamentals and significant growth potential. Apple’s focus on AI, expanding ecosystem, and commitment to returning capital to shareholders make it a solid choice for long-term investors, especially as the company unlocks new revenue streams through AI-driven product and service enhancements.
Alphabet, with its continued dominance in digital advertising, expanding AI capabilities, and robust growth in its cloud business, is well-positioned to deliver solid growth. Its strong financial performance and aggressive share buybacks make GOOGL an attractive option for growth-oriented investors.
Ultimately, both Apple and Alphabet are solid long-term investments. However, Alphabet is more likely to benefit from AI-driven opportunities. This is reflected in Wall Street’s consensus rating, as analysts slightly favor Alphabet over Apple. Moreover, analysts see more upside potential in Alphabet stock at current levels, making it a more enticing option to buy now.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
