Apple vs Amazon: Which tech giant has better growth prospects?

In early September, Amazon’s market value briefly went over Sh100 trillion ($1 trillion, just over a month after Apple became the first public company in the world to achieve such a feat.

Both tech companies have grown over the last few years, but will this continue? Apple and Amazon are as different from each other as apples and oranges. Apple is a tech company that is also a trendy consumer brand.

Its computers and devices have often been must-have gadgets, and customers are willing to pay far more for their products than cheaper alternatives. On the other hand, Amazon is where people go when they want to get a product more cheaply, more easily, or more quickly.

Since the iPhone first went on sale in 2007, Apple shares have soared by 1,100 per cent and have jumped almost a third in the past year.

As for Amazon, the internet retail giant has seen a steady, yet speedy rise in its share price, with. Although Apple and Amazon offer different products and services, they are both technology firms and make up two of the five best performing technology stocks on the market - typically known as FAANG, which stands for Facebook, Apple, Amazon, Netflix and Google.

Which company has a better outlook on long term growth? Here’s a look at some of the key areas for each firm, and how they are performing.

Device sales

Traditionally, most of Apple’s revenues have come from its device sales - particularly the iPhone, iPad, iMac and iPod. pple only has a 14 per cent share of the global smartphone market, yet its revenues consistently dwarf its nearest competitor.

According to Strategy Analytics, in the first quarter of 2018, Apple captured Sh6.1 trillion in revenues, whereas Samsung only achieved Sh1.9 trillion , followed by Huawei in third position with Sh800 billion in revenues.

Image copyright Getty Images Image caption The iPhone is popular with consumers, but people now wait longer before they buy new devices

“Apple’s dependence on iOS devices has been its strength, but moving forward presents its greatest challenge, in that opportunities to grow its user base will be limited,” Juniper Research’s head of forecasting and consultancy Windsor Holden tells the BBC. “We don’t believe revenues will decline, but the opportunity to generate significant new revenues will diminish over time, as increasingly Apple relies on creating additional value from existing customers.”

Amazon has performed below expectations over the last five years with its devices, which include Kindle e-readers, Kindle Fire tablets and Echo voice-controlled speakers, but analysts say it can afford to do so.

“Amazon can sustain a model where they can sacrifice margins on devices, because they generate revenue from services and content,” explains Gartner principal analyst Roberta Cozza. In 2017, there were 1.5 billion smartphone shipments worldwide, according to Juniper Research.

Western markets

However shipment growth will continue to slow down over the next five years, since most consumers in western markets now already own smartphones. Apple also faces huge competition in all regions from Chinese Android smartphone makers, who are releasing feature-rich premium devices which are cheaper than Apple and Samsung’s devices.

“In a competitive landscape where you have this level of commoditisation and low cost, it becomes risky for Apple to heavily rely on hardware sales,” adds Ms Cozza.

One key area of business growth potential is the connected home.

Both Apple and Amazon have developed artificially intelligent virtual personal assistants and wireless smart speakers, but in this space Amazon has a clear advantage. Apple’s virtual assistant is Siri, and it recently released the Home Pod wireless speaker. Amazon’s virtual assistant is Alexa, and it has a line of Echo smart speakers.

The Home Pod is focused on providing a music experience, while Amazon wants you to use the Echo to control the lights in your home and to manage your daily life. And Amazon’s Echo already has a much higher household penetration than Apple’s Home Pod.

“If you speak to people in the industry, they say it’s a lot easier to work with Amazon, because you’re dealing with a much more open ecosystem,” says Mr Holden. “Both companies are facing issues around regulations.... but if it comes down to a straight fight between Amazon and Apple, then given that Amazon has these various strong strings to its bow, then ultimately my belief is that Amazon will win out,” says Mr Saunders.