In this first-round matchup, the i-Everything maker pairs up against the social media giant.
March 13, 2023
Welcome to our 7investing March Madness competition! Throughout this campaign, we’re matching popular stocks up against one another to determine which will be the best investment over the next three years. And then, by voting in the poll at the bottom of the article, you can help us determine which stock will go on to the next round!
Our rankings are determined by the total return of the stock during calendar 2022. The highest-ranked stock had the best overall return of those in our tournament, and our lowest-ranked stock had the lowest overall return.
In this first-round matchup, i-everything consumer device maker Apple matches up against the social network pioneer Meta Platforms. Both stocks had a challenging 2022: Apple was down (30%) while Meta Platforms fell (63%).
But past performance is not predictive of future returns. Which of these stocks do you believe will provide investors with the best forward three-year return? Read our investing thesis and cast your vote in the poll below!
Our Market Madness tournament is in support of our new 7investing Starter membership, which we are giving away free during the entire month of March. To get started with Starter — and to see how it’s already beating the market by 20 percentage points — click here to automatically apply your “madness” promo code.
Advisor Coverage: Anirban Mahanti
Time and time again, Apple has set the tone for the computing industry, from the groundbreaking Macintosh in 1984 to the revolutionary iPhone in 2007. The company has transformed the way we live, work, and play. The App Store, which was born out of the iPhone, has created an entire generation of companies, changing the very fabric of the tech industry. Despite criticism, Apple’s innovation never stops, as seen in its wearable platform, pioneering services, and futuristic designs.
But Apple is more than a technology company; it is a visionary force that stands for more than just products. Its unwavering commitment to leaving the world better than it found it is reflected in every aspect of its operations, from environmental initiatives to privacy and security measures, and social responsibility efforts.
Apple’s passion for excellence and reputation for quality have earned it a place in the hearts of millions of people worldwide. It is not just a brand; it is a symbol of progress, creativity, and limitless possibilities. Apple continues to inspire and transform the world of technology, and we can’t wait to see what it will achieve next.
The bull case for Apple is stronger than ever. With its incredible hardware and software integration, Apple has created an ecosystem that consists of over 2 billion active devices and is incredibly sticky. The recent quarter may have been challenging, but the installed base of active devices grew double digits and achieved all-time records in each geographic segment and in each major product category. This indicates that Apple’s ecosystem continues to grow and expand, becoming a fortress with each passing year.
The cycle of devices driving services is working in Apple’s favor, and each new device or feature acts as a catalyst for bringing in new users into the ecosystem or getting existing users to use more than one device or service. The company’s well-run operations and its free cash flow generation, which is nearly twice that of Alphabet or Microsoft, is the envy of all. As long as Apple continues to innovate and grow its ecosystem of devices and services, the company will continue to generate substantial free cash flow. Management has consistently returned cash to shareholders via dividends and buybacks, with Apple bringing back 40% of its own shares over the past decade.
Apple’s incredible hardware and software integration, along with its sticky ecosystem, are key drivers for its growth. The company’s ability to consistently return cash to shareholders and generate substantial free cash flow makes it a formidable force in the tech industry. As long as Apple continues to innovate and expand its ecosystem, the company will remain a cash generation monster, and investors will continue to reap the benefits of their investments.
However, there are also key risks that investors should consider. Regulatory risk is a significant concern for Apple, as the company faces increasing scrutiny from regulators around the world. In addition, there is the risk of missing the next big thing. Apple has a history of being a late entrant to new markets but ultimately dominating them with superior products. What if Apple’s penchant for waiting for trends to form becomes its Achilles heel? While these risks are real, the fact remains that Apple has deftly managed regulators and geopolitical tensions. And just because the company is hush-hush about its product pipeline does not mean that there aren’t big things cooking at Cupertino, be it related to virtual or augmented reality, autonomous driving, or large-scale application of artificial intelligence. Perhaps more than these, the issue of Tim Cook retiring should be investors’ foremost worry. Cook has carried the Jobs’ torch beautifully while setting up Apple for great things. The next leader of Apple will have big shoes to fill!
Advisor Coverage: Matt Cochrane
Meta Platforms (NASDAQ:META), still better known as Facebook, is a company besieged by problems from all sides. Meta is a company that has earned the mistrust of consumers the world over. It has betrayed the public trust several times, playing fast and loose with users’ privacy agreements and personal data. Paradoxically, Meta’s apps are used by so many consumers that it has nearly saturated its growth markets, especially in the developed world.
On the one hand, Meta is being sued by the Federal Trade Commission (FTC) over allegedly maintaining its social network monopoly through anti-competitive behavior. On the other hand, it is surrounded by competition, ranging from new platforms such as TikTok, which has gained popularity through viral short-form videos, to older competitors such as Pinterest, Snap, and Twitter.
Because Meta lies on top of mobile operating systems, it is vulnerable to iOS or Android changes. To escape this exposure, it must invest billions of dollars in AI and the next-generation platform, which CEO Mark Zuckerberg desperately believes can be fulfilled by the company’s VR glasses, the Meta Quest 2, or its yet unnamed AR glasses scheduled for release in 2024.
Yet Meta’s economic moats have persisted in the face of these challenges. In Q4, user growth and engagement rose. Even DAUs in the U.S., its most mature market, rose 2% year over year. Despite what critics would have you believe, Meta’s Family of Apps is far from dead.
Yes, Reels, Apple’s platform changes, and a weak macro environment are all contributing to pricing pressure, but Meta is not through Apple’s IDFA changes, which made effective ad targeting more difficult. Reels monetization is improving. Massive AI investments seem to be both paying off and slowing. Meta’s valuation, even after rebounding hard off its 52-week lows, remains compelling. With the ball in Zuck’s hand and the clock ticking, Meta might be worth a shot in your portfolio.
Will Apple or Meta Platforms be the better investment for the upcoming three year period? Cast your vote in our live poll below!
Welcome to our @7investing Market Madness tournament!
— 7investing (@7investing) March 13, 2023
Last week’s matchup paired Moderna (NYSE: MRNA) up against Tesla (NASDAQ: TSLA).
Our analysis showed Moderna to have a strong pipeline of future opportunities using mRNA for drug delivery. And Tesla’s “chain of startups” is a differentiating factor that allows it to step on the innovation accelerator and leave competing auto OEMs in the dust.
Ultimately, Tesla won a convincing 76% of the vote and will be progressing on to the next round.
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