Apple vs Meta

When the topic of artificial intelligence is on the agenda too often, you want to distract yourself and think about something else. Let’s talk about…virtual reality today! The fact is that recently the competition between Apple Vision Pro and Meta Quest 3 has been discussed as often as Nvidia vs AMD. And behind the comparison between devices is the competition of two very progressive and interesting companies for us: Apple and Meta Platforms. We do not intend to compare Apple Vision Pro and Meta Quest 3. We are not too versed in technology to act as experts. Besides, we don’t want to take someone else’s position and be accused of hidden advertising. However, attention is drawn to the fact that the price of these devices differs by 7 times. Meta’s $500 Quest 3 and Apple’s $3,500 Vision Pro feel very different but also very much the same — this is the conclusion we found in professional reviews on the topic. How can this affect the outcome of the competition, and why is there such a price difference? Let’s briefly name the reasons we were able to reach and build a bridge to the analysis of Meta and Apple stocks — after all, this interests us in the first place.

The expert consensus is that Apple has the best hardware. The technologies are impressive, everything was done at a very high level, which required powerful hardware — as many as 2 chips were used. Because of this, heating increased during complex calculations and, as a result, the need to remove heat — the helmet has an active cooling system, and the body is made of aluminum, which is also passive cooling. Because of this, the weight increased and the battery already had to be pulled out of the helmet — which may create some discomfort.
And what about Meta devices?

They use a simple idea — track the eyes and render a picture in good quality only in the area where the user’s focus falls. Render the rest of the part in low resolution or even blur it a little — this, by the way, will look organic, since this is exactly how our vision works — check it yourself — the image is blurry beyond the focus limit. Thus, you can reduce the load on the chip by at least 2 times and reduce energy consumption.

It looks like the companies are competitors, but still diverged into different niches. This would most likely be the best decision for both companies from a business perspective. By the way, what about the indicators? Both companies reported results this month for the last quarter. META showed record revenue of $40 billion. Apple almost repeated the record of two years ago — about $120 billion. Both companies received the status of a current investment idea according to our rating, that is, its level again turned out to be above 100%. This means that in general, according to 10 metrics, the financial performance of companies turned out to be better than we programmed for an ideal company to invest.

Compared with devices, business indicators can also be characterized as «very different but also very much the same». Apple is inferior in financial performance due to higher costs and lower cash flow relative to accrued earnings than Meta. The smartphone designer is also more aggressive in dealing with debt, which makes the assessment of its financial position more vulnerable, but increases the efficiency of management in the context of return on capital.

What about the company’s valuation? Are Apple stocks or Meta stocks attractive buys now? Here, too, everything looks extremely similar. Apple is currently trading at about a 29 P/E ratio, while Meta is trading at almost 33. This is slightly higher than usual since Apple has a median P/E of 26.5, which we cut off each quarter. For Meta, this value is 25.5.

What does this mean? This means Apple stocks are trading 7% higher than their median valuation, or overvalued by 7% point relative to the market’s average earnings estimate. Meta stocks are now trading 27% higher than the same level and have almost reached $510 per stock — at this level, the company’s P/E ratio will exceed the level of 34 and this is the maximum over the last 5 years or 20 quarters!

Based on Nvidia’s recent report, it looks like none of these companies are an investor’s dream to take a position at their current price! But with roughly similar metrics, Apple stock is trading relatively cheaper and closer to its average valuation. This could be because Meta’s historical earnings growth rate is higher and the market is pricing in a continuation of that pace. This may explain the discount to Apple’s current valuation.

However, pay attention to volatility. When we talk about Meta Platforms average net income growth rate of 48% over the last 5 years, we must not forget about the volatility of 84%, which we calculated through the standard deviation function. Do not forget that investing is always associated with risk and make the most informed decisions possible.

Take care of yourselves and your investments!