We live in a tech-driven world. High tech, in networking, computing, and data crunching – is bringing a multitude of changes, to the ways we communicate, or analyze data, or entertain ourselves. And for investors, tech is bringing huge potential for profitable growth and further innovation.
Nowhere is this more true than in the world of AI. Artificial intelligence is the shiny new thing in tech, the sudden advance in technology that promises to take tech into the next decade or beyond. Generative AI, with its ability to converse in more human terms, is especially promising in this regard. The financial possibilities, also, are nearly endless; as an industry, generative AI is expected to total some $1.3 trillion by the end of this decade.
But even with such a rich background, the ‘trick’ for investors is still recognizing the right stocks to win in the current tech environment. Some have hit a plateau, others are just not seeing the large-scale gains that are possible.
Against this backdrop, analyst Hans Engel, of Erste Group, has been looking closely at both Apple (NASDAQ:AAPL) and Intuit (NASDAQ:INTU), and has a clear conclusion on which is the superior tech stock to buy. Let’s take a closer look.
Apple
We’ll start with one of the tech industry’s true leaders – Apple. Through its innovative products, Apple has consistently driven technological advancement. Most recently, CEO Tim Cook made headlines with the company’s pledge to integrate generative AI into its product lines.
This is not to say that Apple’s story is all roses. Apple is sometimes perceived by industry analysts as being too dependent on iPhone sales to drive revenue – and with the Chinese market both turning shaky and turning toward greater protectionism, that could be a dangerous course. Offsetting this is Apple’s business model, which has focused on building up a dedicated customer base tied to the company’s unique operating system. It is simply not easy for Apple product users to switch away from Apple’s ecosystem, and that fact has helped Apple to build up a customer base of approximately 2 billion strong, or roughly one-quarter of the global population. These customers will have a strong incentive to stick with Apple when upgrading products, trying new devices or services, or experimenting with new technologies.
This combination of gigantism and a self-contained customer base has brought solid results for Apple. The company’s fiscal 2Q24 report, released at the beginning of May, showed a sound top line of $90.8 billion in total revenue. That figure beat expectations by $190 million. The company’s EPS, $1.53 per share, was 3 cents ahead of the forecast.
We should note here that Apple’s stock is up more than 10% in just the last 10 days, since the company announced the much-anticipated upcoming autumn rollout of its Apple Intelligence AI initiatives.
In his coverage for Erste Group, analyst Hans Engel notes Apple’s strong customer loyalty as a net positive, along with the company’s quality product line.
“Apple benefits from a very high level of customer loyalty. Ongoing innovations in Mac products (including the M4 chip) and high-end iPhones will lead to a continuation of the long-term growth trend. In addition, the iPhone is particularly popular with young customers – in the USA, the market share among teenagers is 90%. We also believe that AI integration with Open AI (ChatGPT) will lead to rising software and hardware sales,” Engel noted.
For Engel, this all adds up to a Buy rating on AAPL shares, an upgrade from his previous Hold. (To watch Engel’s track record, click here)
The Erste analyst did not put a price target on Apple’s stock, but the average target price from the Street is $212.41, suggesting a modest upside of ~2% from the current share price of $207.49. The stock’s 35 recent analyst reviews, which include 23 Buys, 11 Holds, and a single Sell, give the shares a Moderate Buy consensus rating. (See Apple stock forecast)
Intuit
Next up is Intuit, a software company with a strong presence in the personal finance and small business niches. The company’s best-known products are TurboTax and QuickBooks, which offer tools for tax calculation and filing, along with bookkeeping and basic accounting, easily optimized for both home and small business purposes. Intuit’s product line also includes Mailchimp, the email automation system that has proven popular with marketers.
The common denominator with Intuit’s products is their bent toward making financial and marketing systems easier to use. Their combination of sound record-keeping tools and automation systems makes it possible for both professionals and non-professionals to meet and overcome financial challenges with sound decision-making.
Some numbers will show just how popular these software tools are. The basic number is 100 million – Intuit has approximately that many customers worldwide. This customer base is served by 19 offices in eight countries, which together employ some 18,000 people. And in its fiscal year 2023, Intuit brought in $14.4 billion in total revenues.
In its most recent fiscal quarter, the company’s 3Q24 which ended this past April 30, Intuit reported a top line of $6.7 billion, up 12% year-over-year and beating the forecast by $100 million. This was a good sign for the company as a whole, as the fiscal Q3, which covers the US tax season, is Intuit’s strongest quarter of the year. The company’s quarterly earnings were reported as $9.88 by non-GAAP measures, a solid figure that was up 11% y/y and beat the forecast by 50 cents.
In his write-up of Intuit, analyst Engel notes the company’s profitability – but also its presence in a highly competitive niche. He says, “Intuit has slightly raised its forecast for expected revenue development in the current financial year. Accordingly, revenues should increase by approx. +13% (Y/Y) to approx. USD 16.2 bn. The company’s profitable growth continues. However, the majority of Intuit’s customers are smaller companies/self-employed persons, where competitive pressure represents a long-term risk for Intuit. The stock’s above-average P/E ratio in a sector comparison currently reduces the stock’s medium-term performance potential.”
This view leads the Erste analyst to downgrade INTU from Buy to Hold. He declines to put a firm price target on the stock.
Overall, it would appear that Engel is the outlier. INTU shares have a Strong Buy consensus rating, based on 21 recent reviews that break down to 18 Buys and just 3 Holds. The stock is priced at $632.15 and its $722.67 average price target indicates room for a ~14% upside by this time next year. (See INTU stock forecast)
Bottom line: It’s clear that Erste analyst Hans Engel is recommending Apple over Intuit, as the superior tech stock to buy today.
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
