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Apple (Nasdaq: AAPL) has garnered all the headlines recently – and rightfully so. The tech stock has been on a tear, soaring an incredible 50% in the first two and a half months of 2012 to push past $600 a share this week. Apple’s mind-boggling winning streak has made it the largest publicly traded company in the U.S. by far with a market capitalization that’s fast approaching $600 billion.
Apple seems unstoppable right now. But is it the best technology stock on the market? Our own Kevin McElroy doesn’t think so. He prefers Intel (Nasdaq: INTC). I’m paraphrasing here, but his rationale is that Intel is cheaper, has a bigger dividend and dominates its field even more than Apple as the only relevant chipmaker on the market.
Let’s examine some of Kevin claims more closely to fully compare the two tech stocks:
- “It’s cheaper”: Well, there’s certainly no debating that claim. That’s like saying Shaquille O’Neal is taller than Danny DeVito. It’s a no-brainer. Intel is currently trading at $27.75 per share. As I mentioned before, one share of Apple currently costs over $600. That means you could buy 21 shares of Intel for the cost of just one share of Apple. Again – a no-brainer. But it’s also vastly cheaper on an earnings basis. After cash, Apple currently sells for just over 16 times earnings. But after you subtract out Intel’s cash, it sells for under 11 times earnings. All other things being equal, Intel is 35% cheaper on an earnings basis. That’s a serious discount.
But according to Kevin – all other things are NOT equal.
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“It offers a bigger dividend”: This wasn’t even a contest until this week. Apple didn’t offer a dividend until it announced on Monday that it will finally be giving some of its mountain of cash back to investors. The new Apple dividend will be a payout of $2.65 a share per quarter, a yield of about 1.75% at the moment. Intel’s quarterly dividend is a more modest $0.84 a share. But with a stock price of just $27.81, the yield is much more generous than Apple’s at 3%. Intel’s dividends, therefore, give you more bang for your buck.
- “It’s more dominant in its field”: This one’s a little more subjective. But with a market cap of $139 billion, Intel is by far the largest publicly traded company in the semiconductor industry. The closes competitor in its industry among publicly traded companies is probably Texas Instruments (Nasdaq: TXN), whose market cap of $38.5 billion makes it worth $100 billion less than Intel. As a chip maker, Intel occupies more of a niche field where there is less competition. Meanwhile, Apple faces challengers from all sides – Amazon (Nasdaq: AMZN) in the electronic tablet market, Microsoft (Nasdaq: MSFT) and Google (Nasdaq: GOOG) in the smartphone and software arenas, and Dell (Nasdaq: DELL) in the personal computers business. Those companies all trail Apple by a wide margin now, but all of them are trying to play catch-up in a number of markets that are becoming increasingly crowded. So Apple is fighting tough battles on several different fronts, whereas Intel has a narrow focus with few serious competitors.
So it seems that Kevin’s Intel preference isn’t far off base. Granted, Apple has been a runaway freight train of a stock in recent months, and you would be a very rich investor if you loaded up on shares of the stock back in November.
But Intel has been no slouch, either. The stock has gained 14.4% in 2012. We all know how great Apple is. But for investors who aren’t willing to buy the world’s largest company after it has run up over 50% in 3 short months, Intel is an appealing alternative.