With a rank of #13 on the Robinhood 100 list, Apple Inc. (AAPL) is the world’s largest technology company, specializing in consumer electronics, software, and online services. On the other hand, Tesla, Inc. (TSLA), a well-known name in the electric vehicles industry, is ranked #14 on the list. It develops, manufactures, leases, and sells electric vehicles and energy generation and storage systems globally.
Robinhood has become the most popular trading platform among millennials and Generation Z for its zero-commission policy. With last year’s lockdowns, as people were compelled to stay at home, many have started taking an active interest in trading as a hobby. The company reported 22.50 million user accounts in the second quarter of 2021, a 130% increase from 9.80 million in the same period last year. Based on Gen Z and millennials’ interest, AAPL and TSLA are positioned within the top 15 most popular stocks on Robinhood.
TSLA has gained 27.8% over the past six months, while AAPL has returned 17.7% over this period. Also, TSLA’s 10.7% gains year-to-date compares with AAPL’s 7.6% returns. In terms of the past year’s performance, TSLA is the clear winner with 86.4% gains versus AAPL’s 25.2%.
But which stock is a better buy now? Let’s find out.
Recent Financial Results
For the fiscal third-quarter ending June 26, AAPL reported revenue of $81.43 billion, up 36.4% year-over-year. This marks a new June quarter revenue record. The company’s services revenue increased 32.9% year-over-year to an all-time high of $17.49 billion. Its net income grew 93.2% from the year-ago value to $21.74 billion. Its EPS increased 100% year-over-year to $1.30.
TSLA’s total revenues increased 98.1% year-over-year to $11.96 billion in the fiscal second quarter ended June 30. Gross profit stood at $2.88 billion, up 127.6% from the same period last year. Net income attributable to common stockholders grew 998.1% from the year-ago value to $1.14 billion. The company’s EPS increased 920% year-over-year to $1.02.
Past and Expected Financial Performance
AAPL’s revenues grew at a CAGR of 10.8% over the past three years. Analysts expect AAPL’s revenue to increase 30.9% in the current quarter, 33.5% in the current year, and 3.9% in the next year. The company’s EPS is expected to grow 68.5% in the current quarter, 70.4% in the current year, and 1.6% in the next year. Moreover, its EPS is expected to grow 19.9% per annum over the next five years.
On the other hand, TSLA’s revenues grew at a CAGR of 45.2% over the past three years. Street expects the company’s revenue to increase 50.2% in the current quarter, 59.1% in the current year, and 34.4% in the following year. The company’s EPS is expected to grow 88.2% in the current quarter, 140.2% in the current year, and 32.3% in the next year. Moreover, TSLA’s EPS is expected to grow 51.8% per annum over the next five years.
AAPL is more profitable with a gross profit margin and EBITDA margin of 41.01% and 31.96%, compared to TSLA’s 22.04% and 13.74%, respectively.
Furthermore, AAPL’s ROE, ROA, and ROTC of 127.12%, 19.30% and 31.69% compare with TSLA’s 12.28%, 4.35% and 6.32%, respectively.
Thus, AAPL is more profitable here.
In terms of forward P/E, TSLA is currently trading at 212.15x, 87.9% higher than AAPL’s 25.60x. Also, TSLA’s forward EV/EBITDA ratio of 78.19 is 75.5% higher than AAPL’s 19.13.
Thus, AAPL is relatively affordable here.
AAPL has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. On the other hand, TSLA has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
AAPL has a B grade for Sentiment, which is justified as out of the 25 Wall Street analysts that rated AAPL, 19 rated it Buy, while six rated it Hold. In comparison, TSLA has a C grade for Sentiment. Among the 26 Wall Street analysts that rated TSLA, 12 rated it Buy, seven rated it Hold, while the other seven rated it Sell.
Both the stocks have a grade of B for Quality, owing to their higher-than-industry profit margins. AAPL’s levered FCF margin of 23.22% is 87.1% higher than the industry average of 12.41%. On the other hand, TSLA’s levered FCF margin of 10.79% is 45.9% higher than the industry average of 7.39%.
It’s no surprise that the millennials are taking an active interest in leading industry movers, AAPL and TSLA. Both the stocks have demonstrated immense growth potential. However, relatively higher profitability and lower valuation make AAPL the better Buy here.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology – Hardware industry here. Also, here to view the top-rated stocks in the Auto & Vehicle Manufacturers industry.
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AAPL shares were trading at $140.55 per share on Friday afternoon, down $0.95 (-0.67%). Year-to-date, AAPL has gained 6.42%, versus a 16.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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