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Comparing Apple and Snowflake: Which Warren Buffett Investment Shines in 2024?

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Comparing Apple and Snowflake: Which Warren Buffett Investment Shines in 2024?

Warren Buffett, known as the Oracle of Omaha, has dazzled investors with his strategic stock picks as the CEO of Berkshire Hathaway (BRK.B). Despite the lofty heights of the current stock market, two tech giants gracing Buffett’s portfolio – Apple (AAPL) and Snowflake (SNOW) – have lagged behind market trends in recent times.

For savvy investors eyeing a potential opportunity amidst the dip, let’s analyze which Warren Buffett investment shines brighter in 2024.

Decoding Snowflake’s Market Performance

Snowflake (SNOW), valued at a staggering $53 billion in market capitalization, emerges as one of the fastest-growing stocks globally. However, the tech powerhouse finds itself trading at a significant 60% discount from its peak, wrestling with a slowdown in revenue growth and the departure of its high-profile CEO.

While Snowflake showcased an impressive almost threefold surge in sales to $265 million in fiscal 2020, the growth trajectory noticeably decelerated in fiscal 2024, clocking in at 36% with revenues reaching $2.8 billion. Despite this, the company unveiled promising figures in Q4 with an expanding clientele, as evidenced by key data points.

Snowflake’s robust performance indicators, including a soaring net revenue retention rate at 131%, reflective of an upsurge in existing customer spending, and a healthy free cash flow of $324.3 million in Q4, hint at a business model geared for success, marked by impressive operating leverage and solid margins.

Trading at 167 times forward earnings, Snowflake’s stock remains on the pricier end post its recent downturn, characteristic of growth stocks commanding premium valuations.

Of the 39 analysts covering Snowflake stock, sentiments are varied with 23 advocating a “strong buy,” three preferring a “moderate buy,” eleven suggesting “hold,” and two advising a “strong sell.” With an average target price of $205.39, there’s an upside potential of 26.5% projected for SNOW stock.

Unlocking Apple’s Potential

Apple (AAPL), a beacon of innovation globally, witnesses a major portion of its revenue stream flowing from the iconic iPhone business, currently grappling with declining shipments in China. Despite the downturn experienced by many Big Tech counterparts, Apple finds itself over 14% below its peak levels.

In recent times, the Chinese market has been pivotal for Apple’s iPhone dominance; however, stiff competition from local players like Huawei and Xiaomi has chipped away at its market share.

Apple’s Services arm, with its consistent double-digit growth rates, acts as a pivotal contributor to bolstering profit margins. Additionally, the company’s subscription offerings such as Apple Care, Apple Music, and Apple TV+ provide a steady cash flow stream across market cycles, although their impact on Apple’s overall growth remains relatively subdued.

Analysts, projecting a positive trajectory, anticipate Apple’s sales to climb by 1.2% to $388 billion in fiscal 2024 and further by 6.4% to $413 billion in fiscal 2025. Earnings are also forecasted to rise steadily from $6.13 per share in 2023 to $6.56 in 2024 and a continued uptick to $7.16 in 2025.

Priced at 27 times forward earnings, AAPL’s stock valuation may seem steep given an anticipated 11% annual growth rate in adjusted earnings over the next five years.

Relative to SNOW, however, AAPL appears more attractively priced in terms of both forward price/sales and its price/earnings-to-growth (PEG) ratio, hinting at a potentially wiser investment choice.

When considering Apple’s exemplary track record of consistently boosting dividend payouts over the past decade, the tech giant emerges as a more appealing investment option compared to SNOW’s current standing.

On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.