The tech sector has not been immune to the current coronavirus crisis, although tech majors have been a little more successful than broader markets. Apple’s stock (NASDAQ: AAPL) has dropped nearly -20% since early February after WHO declared the coronavirus a global health emergency, compared with -12% for Microsoft’s stock. While the two companies have experienced a similar revenue growth rate in the past 5 years (around 7.5% per year), the EPS also having increased to similar levels (13% -14% per year), Microsoft’s relative valuation is slightly ahead of that of Apple with its P / E multiple being 27x against 19x. Overall, Microsoft stocks are likely to continue to outperform during the current crisis, as demand for its cloud and productivity software may hold up better than Apple, which relies heavily on expensive hardware like the iPhone.
Microsoft’s revenues should better resist this crisis
Apple derives more than 75% of its revenues from the sale of increasingly expensive consumer electronics, which could lead to a drop in sales in the event of a global recession, while discretionary spending would drop. Microsoft, on the other hand, gets about 63% of its revenue from cloud computing and productivity-oriented software, which could help demand outperform consumer hardware. In general, cloud services and associated software applications may see increased demand as people work from home and spend more time on online meetings, children connect to schools via video conference, and people generally have more screen time and less travel time.
Check out our full dashboard analysis Is Apple expensive or inexpensive after a move of -20% against -12% for Microsoft? for more details on how Apple and Microsoft stocks have weathered the coronavirus crisis, their relative ratings, and their financial performance in recent years. Parts of this analysis are summarized below.
CORONAVIRUS CRISIS: since the beginning of February, Apple Inc shares have fallen by -20% against -12% for Microsoft.
- Apple’s stock has dropped about -20% since early February, down from -12% for Microsoft, after WHO declared a global health emergency related to the coronavirus.
HISTORICAL PERFORMANCE: From 2009 to 2019, the Apple Inc. share increased by 1.8 times the rate of Microsoft
- The title Apple Inc went from $ 26 at the end of 2009 to $ 293 at the end of 2019, a variation of around 10x.
- During the same period, Microsoft went from $ 24 to $ 157, which is a change of almost 6x.
- This implies that Apple’s stock has increased by about 1.8 times the rate of Microsoft.
How do Apple’s and Microsoft’s ratings compare, based on the fundamentals review?
- P / E ratio: Based on P / E reports from late 2019, while Apple seems cheaper than Microsoft, it is more expensive than it has ever been.
- The final P / E ratio of Apple Inc in 2019 of 24.5 is 0.8 times higher than that of Microsoft 2019 of 30.8.
Historical turnover and EPS growth: the Apple Inc share seems slightly less attractive than Microsoft.
- Apple Inc.’s annual revenue growth for 2014-19 of 7.3% is slightly lower than Microsoft’s 7.7% growth over the same period.
- Apple Inc.’s annualized EPS growth for 2014-19 of 13% compares to around 14% for Microsoft.
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