We are now in a bear market for the first time since 2009, but Big Tech remains strong. We ask which is the better investment right now: Apple or Microsoft?
Businesses all around the globe are feeling the impact of the coronavirus and many are counting the cost. A number of employees are now working from home and social habits are changing every day as the world tackles the virus.
Exposure To Virus Outbreak
The large technology companies are not immune to the effects of the viral outbreak, with many using Chinese factories to create their products.
Apple’s (NASDAQ: AAPL) 5G iPhone launch could be delayed and its demand affected. The final decision hasn’t yet been made, but if it does happen it would hit Apple’s sales hard as all stores in Europe and the U.S have closed, which make up more than half of iPhone sales
I am a guilty Mac and iPhone lover so when it was announced that all Apple stores outside of China were closed last month it was concerning. You can still purchase online, but if you need anything fixed, it will have to wait. This move was clearly made to protect staff and customers, but there is no doubt this will have a huge impact on the company’s physical sales. The company also put a restriction on online sales, limiting customers to two products each as it faces continuous supply chain setbacks.
Microsoft (NASDAQ: MSFT) recently announced that operations are back to normal at its Chinese factories but they are a lot slower than anticipated. Analysts predicted the company to post income of $43.5 billion in the year to June 2020, but like many other tech companies, these forecasts are likely to be revised.
The business has a strong subscription base for many of its products like Office 365 so they will keep getting that cash injection. Also, with more people working from home there could be an increased need for their product and cloud services like Teams and Azure.
Apple vs. Microsoft
Both Microsoft and Apple pay dividends, buy back stock regularly, and look likely to grow in the coming years. They are continuing to do everything they can to keep up with competition and post profits, which is clear following their recent earning calls.
Apple posted record quarterly revenue of $91.8 billion for its fiscal 2020 first quarter, up 9% year-on-year. This revenue could go a long way in helping Apple deal with the current volatility engulfing the market.The iPhone trails behind competitor Samsung who has 17.3% of the market share compared to Apple’s 17.1%. However, Wearables and Home Accessories have surpassed the revenue the company makes from Mac. Products like AirPods and the Apple Watch added to the $10 billion in revenue for the quarter ending in December, this is compared to $7.1 billion in Mac computers.
Microsoft, meanwhile, faces some tough competition in its cloud businesses, with Amazon’s (NASDAQ: AMZN) AWS cloud service holding the market share of 32.4%. Microsoft’s Azure platform is behind at 17.6%, so it has a bit of catching up to do before it makes it to the top.
However, despite not being number one in the cloud space, Azure grew by a huge 62% in its second-quarter results for 2020. Amazon has a good 7-year head start on the company when it comes to cloud storage so there is every chance Azure will be there in good time. Microsoft does make the majority of its revenue from personal computing, containing Windows, Surface, Xbox, and Bing.
Why Is The Downturn A Good Time To Invest?
Microsoft may see a slowdown in hardware sales but more users are tuning in to its subscription services like Microsoft Teams. Meanwhile, we await the decision of Apple’s 5G iPhone launch.
As we all get used to the changing restrictions on work and socialising, I have no doubt that these two large companies will weather the storm and both are still fantastic investments, available at discount prices due to the downturn. They have years of groundwork behind them and, I mean, who else is using their laptop to work remotely, or watch Netflix (NASDAQ: NFLX)? My hands up.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.