In the rapidly evolving field of computing and computer hardware, intense competition is evident as global tech giants heavily allocate resources to research and development. This relentless commitment to innovation places top hardware companies among the largest and most affluent worldwide.

Given the backdrop, in this piece, I have assessed the fundamentals of two prominent industry leaders, Apple Inc. (AAPL) and Dell Technologies Inc. (DELL), to determine which stock is better equipped to thrive. However, before we delve into the comparison of the fundamentals of these two stocks, let’s examine the industry dynamics first.

The future of the tech hardware industry is defined by swift innovation and continuous technological progress. Companies operating within this sector frequently spearhead the development of cutting-edge technologies and products, presenting substantial opportunities for significant growth.

As businesses increasingly adopt digital transformation, there is a growing demand for resilient and scalable hardware infrastructure to handle expanding data, ensure smooth connectivity, and support software applications. Projections indicate that the IT hardware market is anticipated to reach $130.86 billion this year and increase to $191.03 billion by 2029, demonstrating a CAGR of 7.9% spanning 2024 to 2029.

Moreover, the incorporation of Artificial Intelligence (AI), particularly generative AI is profoundly impacting the technology hardware sector, shaping the design, optimization, and utilization of hardware components and systems.

Generative AI facilitates content personalization, delivering customized product recommendations and marketing messages. Additionally, it plays a crucial role in streamlining supply chain management and improving manufacturing process efficiency.

Thus, the vast opportunities arising from the application of AI are positioned to fuel significant expansion within the technology hardware industry in the upcoming years. The global AI in hardware market is projected to grow at an impressive 24.5% CAGR from 2023 to 2030.

With projections indicating a solid growth potential within the industry in the forthcoming years, both AAPL and DELL stand to gain. However, in terms of price performance, DELL appears to have outshined AAPL, by surging 53.9% over the past six months compared to AAPL’s 1.7% gain during the same period.

Likewise, over the past three months, DELL’s shares rallied 25.8% versus AAPL’s 12.8% surge. Furthermore, DELL’s shares have soared 8.9% over the past month to close the last trading session at $82.43. In contrast, AAPL’s shares gained marginally over the past month to close the last trading session at $195.18.

To that end, let’s now dig deeper into the fundamentals of the aforementioned Technology - Hardware stocks to find out which one is the better pick.

Recent Developments

On January 16, 2024, AAPL unveiled a set of revolutionary entertainment offerings set to debut on Apple Vision Pro starting February 2, 2024. Greg Joswiak, AAPL’s Senior Vice President of Worldwide Marketing, described Apple Vision Pro as the ultimate entertainment device, offering a unique experience unlike anything seen before.

With this innovative technology, individuals have the ability to transform any space into the optimal viewing location, partake in personal concerts and adventures through Apple Immersive Video, engage with realistic prehistoric creatures in the Encounter Dinosaurs feature, and even touch down on the moon using Environments feature.

Conversely, On December 14, 2023, DELL disclosed that specialized cloud provider CoreWeave has acquired thousands of DELL’s PowerEdge XE9860 servers featuring NVIDIA H100 Tensor Core GPUs as the core infrastructure for its cloud solutions.

These servers are optimized for large-scale NVIDIA GPU-accelerated workloads, catering to applications such as AI, machine learning, visual effects rendering, and extensive simulations.

Recent Financial Results

AAPL’s total net sales for the fiscal fourth quarter (ended September 30, 2023) declined marginally year-over-year to $89.48 billion. Meanwhile, its net income and EPS amounted to $22.96 billion and $1.46, up 10.8% and 13.2% from the prior-year quarter, respectively. However, during the same quarter, the company’s total operating expenses rose 1.9% from the year-ago value to $13.46 billion.

For the fiscal 2024 third quarter, which ended on November 3, 2023, DELL’s total net revenues amounted to $22.25 billion, while its net income and EPS rose 316.6% and 312.1% from the prior-year quarter to $1 billion and $1.36, respectively. Additionally, during the same period, the company’s total operating expenses declined 7.2% from the year-ago value to $3.66 billion.

Past and Expected Financial Performance

AAPL’s revenue has grown at a CAGR of 7.6% over the past five years, whereas its EBIT increased at a 19.9% CAGR over the past three years. Street expects AAPL’s revenue and EPS for the fiscal 2024 first quarter (ended December 2023) to increase 1% and 11.9% year-over-year to $118.33 billion and $2.10, respectively.

Conversely, DELL’s revenue has improved at a marginal CAGR over the past five years, while its EBIT grew at a 7.7% CAGR over the past three years. Analysts predict DELL’s revenue and EPS for the first quarter (ending April 2024) to increase 3.6% and 10.6% year-over-year to $21.67 billion and $1.45, respectively.

Profitability

DELL’s trailing-12-month cash per share of $11.61 is higher than AAPL’s $1.93. Likewise, DELL’s trailing-12-month CAPEX/Sales of 3.06% is higher than AAPL’s 2.86%.

Thus, DELL is more profitable.

Valuation

In terms of the forward EV/Sales ratio, AAPL’s 7.45x is 766.3% higher than DELL’s 0.86x. Likewise, AAPL’s forward Price/Sales ratio of 7.55x is significantly higher than DELL’s 0.65x. Furthermore, AAPL’s forward EV/EBITDA multiple of 22.33 is 186.6% higher than DELL’s 7.79.

Thus, DELL is more affordable.

POWR Ratings

AAPL has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. Conversely, DELL has an overall rating of B, translating to a Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AAPL has a C grade for Growth, justified by its mixed financial results in its last reported quarter. While DELL’s B grade for Growth is in sync with the solid third-quarter results.

Moreover, AAPL’s D grade for Value is consistent with its stretched valuation metrics. In terms of the forward EV/Sales ratio, AAPL’s 7.45x is 153.9% higher than the industry average of 2.94x. Likewise, AAPL’s forward Price/Sales ratio of 7.55x is 156.8% higher than the 2.94x industry average.

On the other hand, DELL’s B grade for Value is in sync with its discounted valuation metrics. In terms of the forward EV/Sales ratio, DELL’s 0.86x is 70.5% lower than the industry average of 2.94x. Similarly, the stock’s forward Price/Sales ratio of 0.65x is 77.9% lower than the 2.94x industry average.

Among the 36 stocks in the A-rated Technology - Hardware industry, AAPL is ranked #21, while DELL is ranked #6. 

Beyond what we’ve stated above, we have also rated both stocks for Momentum, Stability, Sentiment, and Quality. Click here to view AAPL ratings. Get all DELL ratings here.

The Winner

In the dynamic and competitive realm of the technology hardware industry, both AAPL and DELL exhibit a steadfast commitment to innovation. However, DELL's stronger financial position and more favorable valuation could potentially position it as a superior investment compared to AAPL.

Our research shows that the odds of success increase when one invests in stocks with an overall rating of Strong Buy. View all the top-rated stocks in the Technology - Hardware industry here. 

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

AAPL shares were trading at $195.47 per share on Wednesday morning, up $0.29 (+0.15%). Year-to-date, AAPL has gained 1.53%, versus a 2.68% rise in the benchmark S&P 500 index during the same period.

Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.

More...