Best Stock to Buy Right Now: Apple vs. Amazon

Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) have become household names. You very well may use one of their products every day.

They've also been successful and rewarded investors. Apple's market capitalization has grown to more than $4 trillion, while Amazon's is $2.6 trillion as of Nov. 12.

It's nice to have past success, particularly if you owned the stocks. However, which stock currently offers the better long-term potential?

To make that determination, you have to understand each company better.

Image source: Getty Images.

Apple

Many people associate Apple with well-designed, "cool" products. These include the iPhone, iMac personal computer, iPad, and Apple Watch. It also offers a host of services such as tech support, cloud services, the App store, and payment services (e.g., Apple Pay).

But Apple's iPhone, responsible for the highest portion of sales, remains the main driver. The product accounted for half of the company's $416.2 billion fiscal 2025 sales. The period ended on Sept. 27.

Fortunately, the product's sales, after a couple of sluggish years, began growing again this year. In the fourth quarter, iPhone sales grew 6.1% year over year to $49 billion.

The iPhone could see sales increase at a higher pace next year. Apple released its new version, the iPhone 17, in mid-September. It's early, but the new series had higher sales growth in the U.S. and China than its predecessor over the first 10 days after its release. Of course, the excitement of the new series could dim.

While the iPhone accounts for the biggest portion of Apple's top line, it's not the only significant contributor. The services business represented 26% of Apple's total revenue last year. It's been growing at a brisk pace, including a 15.1% revenue increase in the fourth quarter, to $25 billion.

Services also have a much higher gross margin than product sales. Last year, services had a gross margin of 75.4%, more than double the 36.8% posted by sales.

However, big product launches have failed to materialize or disappointed. This includes the Apple car and Vision Pro, its headset. While specific figures on Vision Pro aren't available, it's part of the wearables, home, and accessories segment that saw a 0.3% drop in fourth-quarter sales.

Amazon

Amazon isn't merely an online retailer, although it's achieved presence and success in that area. It also sells devices like Alexa, Kindle, and Ring, and it has physical stores, including Whole Foods. These businesses are in the North America and International segments.

Amazon Web Services (AWS) has the lowest sales but generates the highest portion of profit. AWS is Amazon's cloud-computing service.

AWS' $93.1 billion of nine-month sales were 19% of Amazon's sales. But the division's $33.1 billion operating income represented more than 60% of the period's profit.

Given that organizations continue clamoring for data, it's a fast-growing business, too. AWS' third-quarter sales increased more than 20% to $33 billion. With the advent of generative artificial intelligence and its rapid adaption, the business's growth seems set to continue for the foreseeable future.

Since the business requires large data centers, not many have the resources to compete. Hence, it has high barriers to entry. And AWS has the leading market share in this growing business. It had a 29% share at the end of the third quarter, higher than Microsoft's Azure (20%), and Alphabet's Google Cloud (13%). No other company had more than a 4% share.

Making the decision

Both Apple and Amazon shares have trailed the S&P 500 index's 16.5% appreciation this year. Apple stock price gained 9.2%, while Amazon went up by 11.3%.

However, both now trade at more attractive valuations, based on their price-to-earnings (P/E) ratios. Apple has a 37 P/E ratio, while Amazon sells at a 35 P/E multiple. Both started the year with 40 P/E ratios. For a comparison of relative valuations, the S&P 500 has a 30 P/E multiple.

I can understand Amazon's more expensive valuation than the market, given it has a large portion of its profit tied to its fast-growing AWS business. In fact, this business's high sales growth prospects, limited competition, and strong profits give it the edge over Apple, and I believe make it the better stock to buy.

Lawrence Rothman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.