Battle of the tech titans   Recently updated


If there has been one investment theme in 2017, it would have to be the “Amazon effect.”

Amazon.com’s (AMZN) relentless push forward really went into overdrive this year with its planned purchase of Whole Foods Markets, Inc. (WFM), which gives the online giant a large brick-and-mortar presence.

But the company continues to expand on all fronts with no end in sight.

 

investing

 

Google Power

Of course, Google parent Alphabet (GOOGL) is no growth slouch either.

Despite being the second-largest company in the world by market cap, GOOGL stock continues to grow at a dizzying pace.

Last year, Alphabet grew its revenues by over 20%, which is no small feat given that the company finished 2015 with annual revenues of nearly $75 billion.

 

Profitability

So, if you had to choose only one of these tech giants to hold for the next decade, which would it be?

Let’s take a deeper look at each.

For years, AMZN was snidely called the “river of no returns” by bears that were put off by the company’s focus on growth over profitability.

 

Margin Gap

And frankly, the bears had a point in my opinion.

Last year, Amazon’s net margins amounted to a whopping 1.7%, and that was the highest it has been since 2010.

Alphabet’s net margins are consistently over 20%.

And by most other traditional profitability metrics (return on equity, return on assets, etc.) Alphabet utterly trounces Amazon.

 

No Contest

Again, the numbers are pretty straightforward here.

Sure, Amazon’s profitability is consistently lowered by its constant reinvestment. And retail companies generally have lower margins than software or technology companies.

But no matter how you spin it, GOOGL in my view is the far more profitable company.

In my opinion, the winner is Alphabet

 

Photo Credit: Peter Slater via Flickr Creative Commons

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Charles Sizemore
Charles Sizemore
Sizemore Capital Management LLC is a registered investment advisory firm located in Dallas, Texas. Charles Lewis Sizemore, CFA is the founder and Chief Investment Officer of the firm.