Many technology stocks have made gains in recent weeks and months. Until a year ago, they were still very popular with investors. The two parks that met this fate are Amazonshare (WKN: 906866) and Tesla-Actien (WKN: A1CX3T).
Based on the cheapest valuation, which of these two tech stocks might be the better buy? Amazon or Tesla facing the biggest challenge? Who is most likely to grow in their assessment?
Amazon segment: E-commerce is weakening
E-commerce is the line of business in which Amazon’s stock has grown. The e-commerce group is known worldwide for this. But the biggest profit driver now is the cloud division of Amazon Web Services. Amazon can now count itself very lucky to have invested in this business at the right time. Because without AWS, the US company would currently be in the red.
However, the operating profit margin recently fell to 2.0%. A year ago it was twice as high. The management has recognized the problems, wants to save more and increase efficiency. In the coronavirus pandemic, Amazon seems to have invested less aggressively and aggressively. Uncertainty among consumers and corporate customers is causing a slowdown in growth and thus overcapacity: In the usually strong Christmas quarter, sales are expected to grow in the single digits at best.
From a long-term perspective, Amazon still seems to have a good chance. At some point the state of the economy as a whole will be better than it is now. Then cloud sales and e-commerce revenue will be realized. The price-earnings ratio (P/E) of Amazon stock was below 80 (as of November 10, 2022).
Tesla Park: where does the journey go?
Until a few weeks ago, Tesla stock was still quite strong. But Elon Musk’s takeover of Twitter is currently causing some bad publicity. In addition, there is a general rather declining outlook in the automotive sector: supply constraints such as the lack of chips are no longer available, while demand is collapsing at the same time. Conditions that until recently brought record gains for many auto stocks are changing fast. Market participants fear that this will also affect Tesla’s stock.
However, Tesla stock is one of the automakers with the best chance of an economic downturn. Otherwise only luxury producers get like Porsche and Ferrari Profit limits like Tesla. That means the electric car maker has more room to lower its prices and still make a profit over other auto stocks.
As long as possible Advantage drivers such as autonomous driving with the humanoid robot Optimus strengthen the overall picture. Tesla operates from a strong position and, despite all the obstacles, wants to continue growing at a rate of 50% per year. The weighted valuation and P/E is just 55 for Tesla stock.
In a duel of falling tech stocks, Tesla stock may be a better buy than Amazon stock on this basis. Of course, you have to decide for yourself if an electric car manufacturer is suitable for your personal portfolio.
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Christoph Gössel has shares in Amazon and Tesla. John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. The Motley Fool owns stocks and recommends Amazon and Tesla.