Forget Apple Stock: Buy This Growth Monster Instead

Apple stock (NASDAQ:AAPL) fell after seeing Chinese sales drop 13% during the quarter, so perhaps consider this other tech stock instead!

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published February 5, 2024 4:10 pm EST

| More on: AAPLOTEX

Apple (NASDAQ:AAPL) shares fell pretty dramatically last week after Apple stock came out with earnings results that showed weak China sales performance. The tech giant remains in the trillion-dollar market cap range at US$2.8-trillion as of writing, but the recent announcement brought shares down by 8% from 52-week highs.

So is this your opportunity to get in? Perhaps, but for now I might consider this other growth stock instead.

What happened

Investors really cared about China sales during Apple stock’s recent release. China is the company’s third-largest market, and one that continues to pose challenges with so many Chinese companies continuing to create competition.

Add in cautious consumer spending and an economic slowdown, and Apple stock saw sales drop 13% in the quarter. This missed estimates of US$23.5 billion, bringing it down to US$20.8 billion instead. Shares dropped 3% after the news, and continued to fall on Friday as well.

All this adds to the mounting pressure that Apple experiences in the world’s largest smartphone market. Especially as Huawei continues its comeback with high-end smartphones. But Huawei wasn’t alone, with other Android brands also edging in on Apple stock’s market.

The “wow” factor

What some analysts have identified as Apple stock’s issue is providing that “wow” factor. Not just in China, but elsewhere as well. There has been a lack of innovation when it comes to the company’s design aesthetic compared to others in recent years.

That’s especially the case when it comes to integrating artificial intelligence (AI) into these smartphones, something Android is already doing. While Apple stock hinted at AI news later this year, it hasn’t happened yet.

So for now, it might be time to look at other companies that are producing strong results, seeing shares climb instead of drop – ones with recurring revenue, rather than depending on consumer products that lack innovation.

Be open

One option that investors may want to consider is OpenText (TSX:OTEX), after the cloud company delivered strong second quarter results last week. While the tech stock missed its earnings before interest, taxes, depreciation and amortization (EBITDA) margin estimates, it was still a solid quarter. Shares dropped 7% after the news, but are still up 26% in the last year alone.

Revenue rose 71% year over year, beating out estimates, driven by a 58% rise in annual recurring revenue. OpenText continues to see strong deals and cloud bookings moving the company forward. In fact, it managed to increase its full-year cloud bookings guide as well.

While full-year guidance remained largely unchanged, that guidance is certainly good enough for investors to consider the stock. Its acquisition of Micro Focus was a solid move, and the sale of its non-core assets provide a stronger portfolio. What investors are still waiting on, however, is getting that full integration of Micro Focus up and running. However, once it does, there is a lot for shareholders to look forward to in terms of growth through to 2025.

So with shares offering recurring revenue, stable growth, and value with shares trading at 2.4 times sales, it looks like a great time to get into OpenText stock. Even over the Magnificent Seven Apple stock.