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Warren Buffett is arguably the greatest investor of all time. Also called the Oracle of Omaha, the CEO of Berkshire Hathaway (BRK.B) has generated massive wealth by investing in the stock market. While equities are trading near all-time highs, two tech stocks - Apple (AAPL) and Snowflake (SNOW) - that are part of Buffett’s Berkshire Hathaway equity portfolio have significantly trailed the broader markets this year.
For investors looking to buy the dip, let’s see which Warren Buffett stock is a better buy in 2024.
Is Snowflake Stock a Good Buy Right Now?
Valued at $53 billion by market cap, Snowflake (SNOW) is among the fastest-growing stocks on the planet. However, it currently trades 60% below all-time highs as it wrestles with deceleration in top-line growth and the exit of its high-profile CEO.
For instance, Snowflake almost tripled sales to $265 million in fiscal 2020 (ended in January) - but in fiscal 2024, its revenue growth slowed to “just” 36%, at $2.8 billion. That said, Snowflake still posted some encouraging numbers in Q4. For example, 461 customers now spend at least $1 million annually on the Snowflake platform, an increase of 39% year over year. It ended fiscal 2024 with a net revenue retention rate of 131%, which means existing customers increased spending by 31% in the last 12 months.
Snowflake’s remaining performance obligations, or RPOs, rose 41% to $5.2 billion, providing investors with sufficient revenue visibility. Snowflake's asset-light business model has allowed It to benefit from high operating leverage. It reported a free cash flow of $324.3 million in Q4, indicating a healthy margin of 42%.
Priced at 167x forward earnings, Snowflake stock is still expensive after its recent pullback, although growth stocks tend to command a premium.
Out of the 39 analysts covering Snowflake stock, 23 recommend “strong buy,” three recommend “moderate buy,” 11 recommend “hold,” and two recommend “strong sell.” The average target price for SNOW stock is $205.39, indicating an upside potential of 26.5%.
What is the Target Price for Apple Stock?
Among the most innovative companies globally, Apple (AAPL) generates a majority of its sales from the iPhone business, which is experiencing a decline in shipments in China. While many Big Tech stocks have generated impressive gains, Apple is down over 14% from all-time highs.
Over the years, China has been a key market for the iPhone maker. But in the last two years, the iPhone has lost market share to domestic manufacturers such as Huawei and Xiaomi.
Apple’s Services business still experiences double-digit growth rates, and is a key driver of profit margins. Additionally, Apple has several subscription businesses, such as Apple Care, Apple Music, and Apple TV+, allowing it to generate stable cash flows across market cycles. However, these businesses are too small to move the growth needle for the tech behemoth.
Out of the 28 analysts covering Apple stock, 16 recommend “strong buy,” three recommend “moderate buy,” eight recommend “hold,” and one recommends “strong sell.” The average target price for AAPL stock is $207.56, indicating an upside potential of over 21%.
Analysts expect Apple sales to rise by 1.2% to $388 billion in fiscal 2024 (ending in September) and by 6.4% to $413 billion in fiscal 2025. Its earnings are forecast to rise from $6.13 per share in 2023 to $6.56 in 2024, with continued upside to $7.16 in 2025.
Priced at 27x forward earnings, AAPL stock is expensive, given that adjusted earnings are forecast to rise by 11% annually in the next five years.
However, the shares are far cheaper than SNOW on this basis, and also in terms of forward price/sales. Likewise, AAPL's price/earnings-to-growth (PEG) ratio of 2.81 is steep, but not nearly as steep as SNOW's 5.01.
Given that, plus AAPL's decade-long history of steadily increasing dividend payments, the iPhone parent looks like a better buy than SNOW at current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
