Apple (AAPL), Alphabet (GOOGL), and Microsoft (MSFT) are well-known among the big tech giants that have leading roles across various technology sectors beyond semiconductors. I wanted to perform a comparison of these 3 stocks, and I will use the TipRanks Stock Comparison Tool to assist me in evaluating which of these titans offers the best stock opportunity right now. While I view all three companies as long-term winners and maintain a bullish outlook on each, I believe that Alphabet is currently best positioned for the most significant upside, making it the top stock at this time.
Don't Miss our Black Friday Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Core Business Overviews for these Three Tech Titans
While I maintain a bullish stance on Apple, Alphabet, and Microsoft for the long term, it’s essential to establish the core differences in their businesses. First, Apple’s strength lies in its hardware, including the iPhone, Mac, and wearables; products which account for over 70% of revenue and reinforce its brand power. Moreover, Apple’s growing services segment (comprising the App Store, iCloud, Apple Music, and Apple Pay) now contributes nearly 30% of revenue, adding to its ecosystem.
On the other hand, Alphabet, the leader in digital advertising, generates the majority of its revenue through Google Search and YouTube, commanding a dominant share of the global search engine market. Furthermore, the company is adding to its investments in cloud computing via Google Cloud, which is growing rapidly but still trails behind industry leaders Azure (Microsoft) and AWS.
In contrast, Microsoft excels in enterprise and cloud computing. Azure is the second-largest cloud platform globally, driving substantial growth for MSFT. Additionally, Microsoft’s software suite, including Windows and Microsoft 365, maintains a strong foothold in the productivity and enterprise space, solidifying the company’s market position.
Comparison of Valuation Metrics
Despite trading at premium valuation multiples relative to their industry averages, my positive outlooks on Apple, Alphabet, and Microsoft remain supported by strong business fundamentals.
Apple stock trades at a forward P/E of 33.8x, roughly 40% higher than the technology hardware industry average and 23% above its five-year historical average. Alphabet stock, meanwhile, trades at a forward P/E of 21.2x, almost 60% above the interactive media industry average but about 17% below its GOOGL stock’s own historical average. Microsoft stock trades at a forward P/E of 32.9x, approximately 36% above the system software industry average and just 4.7% above its historical average.
However, when factoring in long-term EPS growth estimates over the next 3-5 years, the picture changes. On the basis of PEG (Price to Earnings to Growth ratio), Apple trades at a stretched forward PEG ratio of 3.9x, while Alphabet and Microsoft are more attractively valued with forward PEG ratios of 1.3x and 2.5x, respectively.
Although Alphabet has the most de-risked valuation, one could argue that Apple and Microsoft’s diversified business models—dominating hardware, software, and subscription services—offer more stable, recurring revenue despite more limited growth prospects. AAPL stock and MSFT stock are supported by broad revenue bases that reduce reliance on a single income stream. GOOGL stock, meanwhile, carries a heavy dependence on cyclical advertising. That difference may justify Alphabet’s discounted valuation relative to Apple and Microsoft.
Capital Return Programs
All three companies (Apple, Alphabet, and Microsoft) are strong investment holdings due to their robust capital return programs. While their dividend yields of below 1% are modest at best, these companies reward shareholders through substantial share buyback programs.
Apple recently authorized a record-breaking $110 billion stock buyback; the largest in corporate history. Over the past twelve months, Apple has repurchased approximately $96.34 billion in common shares, translating to a buyback yield of 2.68% based on a $3.48 trillion market capitalization. Similarly, Alphabet, after announcing its first-ever dividend of $0.20 per share this year, unveiled a $70 billion share repurchase program. Over the past twelve months, Alphabet has repurchased $63.3 billion worth of shares, resulting in a buyback yield of 3.2% on a $2 trillion market cap.
Microsoft’s share buyback efforts are a little less competitive, with a newly authorized $60 billion share repurchase program. Over the past twelve months, Microsoft repurchased $17.2 billion in shares, translating to a buyback yield of 0.5% based on its recent $3.21 trillion market capitalization.
AI and Cloud Potential
As one of the most significant topics in the tech world, the way Apple, Alphabet, and Microsoft have approached AI is a key pillar of my bullish outlook for their stocks.
Alphabet has embedded AI and machine learning across its products, from Google Search to YouTube, and is well-positioned to drive growth through Google Cloud. Analysts project 11% revenue growth for Alphabet over the next two fiscal years. Microsoft, meanwhile, has solidified its AI leadership through its investment in OpenAI, the company behind ChatGPT, as well as through Azure’s AI services. Competing closely with AWS for cloud dominance, Microsoft is forecast to grow revenue by 14.6% over two years.
Apple’s AI presence is a bit more limited. While the company is rumored to be working on advanced AI projects, possibly integrating AI deeper into Siri and its ecosystem, its AI efforts remain less prominent compared to peers. This may explain Apple’s more modest revenue growth forecast, with analysts predicting only a 2.1% top-line increase over the next two fiscal years.
Wall Street Consensus
My bullish views on Apple, Alphabet, and Microsoft align with the majority of Wall Street analysts. Apple, for example, has a consensus Moderate Buy rating based on 33 analysts, with 23 rating it a Buy, nine a Hold, and only one a Sell. The average AAPL price target of $248.89 suggests about 10% potential upside.
Alphabet is viewed even more favorably, carrying a Strong Buy rating from 36 analysts, 27 of whom recommend a Buy, while nine recommend a Hold. Its average price target of $201.94 implies a ~25% potential upside.
Microsoft also has a Strong Buy rating according to the consensus, with 28 of 30 analysts rating it a Buy, and the remaining two rating it a Hold. The average price target of $501.15 points to more than 15% potential upside.
In Conclusion, Alphabet Looks Like The Best Name
In conclusion, while Apple, Alphabet, and Microsoft are all strong long-term investments with dominant positions in their respective sectors, if I had to favor one investment right now it would be GOOGL stock. Alphabet’s strong growth, robust capital returns, and more attractive relative valuation give it a slight edge at this juncture.
