The Company in a Nutshell
- Apple depends on the iPhone’s growth to generate the bulk of its cash flows.
- The company generates about 40% of its revenue in the Americas and 60% internationally.
- Apple shares its wealth with shareholders through dividend payments and share buybacks, but still keeps large amounts of cash on hand.
Date Reviewed | 8/16/2024 |
Company Name | Apple Inc |
Symbol | AAPL |
Sector | Information Technology |
Industry | Consumer Electronics |
Beta | 1.24 |
PRO Rating | 5 |
Dividend Safety | 4 |
Business Model
Apple Inc. (Apple) designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and sells a range of related services. The Company’s products include iPhone, Mac, iPad, AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch and accessories. The Company operates various platforms, including the App Store, which allows customers to discover and download applications and digital content, such as books, music, video, games and podcasts. Apple offers digital content through subscription-based services, including Apple Arcade, Apple Music, Apple News+, Apple TV+ and Apple Fitness+. Apple also offers a range of other services, such as AppleCare, iCloud, Apple Card, and Apple Pay. Apple sells its products and resells third-party products in a range of markets, including directly to consumers, small and mid-sized businesses, and education, enterprise and government customers through its retail and online stores and its direct sales force.
Apple Inc. designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related services. Its product categories include iPhone, Mac, iPad, and Wearables, Home and Accessories. Its software platforms include iOS, iPadOS, macOS, watchOS, and tvOS. Its services include advertising, AppleCare, cloud services, digital content and payment services. It operates various platforms, including the App Store, that allow customers to discover and download applications and digital content, such as books, music, video, games and podcasts. It also offers digital content through subscription-based services, including Apple Arcade, Apple Fitness+, Apple Music, Apple News+ and Apple TV+. Its products include iPhone 15 Pro, iPhone 15, iPhone 14, iPhone 13, MacBook Air, MacBook Pro, iMac, Mac mini, Mac Studio, Mac Pro, and others. It also provides DarwinAI, which specializes in visual quality inspection using its Explainable AI platform.
Current price | 228.06 |
ROE | 171.95 % |
ROIC | 65.80 % |
Shareholder Yield | 0.00 % |
5-Yr Total Return | 334.50 % |
1-Yr Total Return | 31.10 % |
Next Earnings Date | 10-31-24 |
Latest Quarter Information
08-02-2024, Apple reported a solid quarter with revenue up 5% and EPS up 14%, beating analysts’ expectations. This new June quarter revenue record was driven by strong performance in the services segment, which achieved an all-time revenue record of $24.2B (+14%). The growth in services was complemented by the launch of new iPad models, contributing to Products revenue of $61.6B (+2%). Apple works on several strategic initiatives, including the expansion of Apple TV+ productions, new features for Apple Pay, and updates to Apple Fitness+. The company also introduced Apple Intelligence, a generative AI system integrated into its devices.
What the CEO said:
“Today Apple is reporting a new June quarter revenue record of $85.8 billion, up 5 percent from a year ago. During the quarter, we were excited to announce incredible updates to our software platforms at our Worldwide Developers Conference, including Apple Intelligence, a breakthrough personal intelligence system that puts powerful, private generative AI models at the core of iPhone, iPad, and Mac. We very much look forward to sharing these tools with our users, and we continue to invest significantly in the innovations that will enrich our customers’ lives, while leading with the values that drive our work.”
What we say:
08-02-2024, Apple reported a solid quarter with revenue up 5% and EPS up 14%, beating analysts' expectations. This new June quarter revenue record was driven by strong performance in the services segment, which achieved an all-time revenue record of $24.2B (+14%). The growth in services was complemented by the launch of new iPad models, contributing to Products revenue of $61.6B (+2%). Apple works on several strategic initiatives, including the expansion of Apple TV+ productions, new features for Apple Pay, and updates to Apple Fitness+. The company also introduced Apple Intelligence, a generative AI system integrated into its devices.
Investment Thesis
There is continued interest among consumers of premium products. AAPL’s first growth vector remains its iPhone. It is also seeing double-digit growth in its Services division, which generates higher margins; services such as Apple Pay, Apple Music and Apple TV represent just the tip of the iceberg. As more iPhones are purchased, their users are inclined to purchase the services related to them. The company recently reported it crossed the 2B active devices mark in early 2023. Apple’s iPhones and IOS are beloved by customers and are a symbol of stability and security in terms of technology. Management has become increasingly shareholder-friendly, as evidenced by strong dividend growth and massive share buybacks. AAPL is among the rare companies that don’t need to be first movers in a new market. It has the cash flow and expertise to develop products and gain market shares once the market is developed (just think of the Apple Watch’s success). Apple works on several strategic initiatives, including the expansion of Apple TV+ productions, new features for Apple Pay, and updates to Apple Fitness+. The company also introduced Apple Intelligence, a generative AI system integrated into its devices.
Dividend Triangle
5-Yr Rev. Growth | 7.60 % |
5-Yr EPS Growth | 15.50 % |
5-Yr Div Growth | 6.70 % |
Potential Risks
We fear a recession would impact Apple’s results. However, the company still sees many loyal customers upgrade their phones, and it seems to have happened again with the next generation of iPhones. However, the company is facing short-term headwinds that will weigh on its results in 2023 (notably supply chain disruption in China, currency headwinds, and weaker sales due to customers’ budget restraints). It is well-known that tech companies must continually innovate their product offerings to remain on an even playing field with their competition. Apple protects its core products with a strong product ecosystem and additional services. However, the introduction of a competitor’s new phone that could potentially erode iPhone sales remains a possibility. It’s also hard to imagine how much Apple can keep improving its own phone with better cameras and stronger processors. Finally, the competition in artificial intelligence has many contenders, such as Amazon and Google, just to name a few. Our biggest concern in the short term would be the tech sector’s performance, but in the long-term, Apple should continue to perform well.
Debt/Equity | 1.80 |
Financial Debt to EBITDA (TTM) | 0.75 |
Current Ratio (Quarterly) | 1.00 |
Credit Score | 98 |
Dividend Growth Perspective
An investor shouldn’t be fooled by the low yield as AAPL will double its payment every 8 years going forward. Both payout and cash payout ratios are very low. With strong sales growth and consistent earnings increases, the company should maintain a double-digit dividend growth rate for years to come. Unfortunately, the latest dividend increases were only of 4.5% (from $0.22/share to $0.23/share) in 2022, 4.3% in 2023 and 4.2% in 2024. The company continues to post solid cash flow generation, but management decided to approve a $100B share buyback program instead of purely increasing its dividends. As long as they are giving money back to shareholders, we don’t mind much.
Dividend ($) | 1 |
Dividend Yield Fwd | 0.45 % |
Dividend Frequency | Quarterly |
Average 5-Yr Yield | 0.60 % |
Payout Ratio (%) | 15.45 |
Cash Payout Ratio (%) | 14.55 |
DGR 1-Yr | 4.15 |
DGR 3-Yr | 5.75 |
DGR 5-Yr | 6.70 |
DGR Streak | 11 |
Chowder Score | 7.15 |
Next DVD PMT | 08-15-24 |
Valuation
Recent Annual Dividend Payment | $ 1.00 |
Expected Dividend Growth Rate Years 1-10 | 5.00% |
Expected Terminal Dividend Growth Rate | 7.00% |
Discount Rate | 9.00% |
Discount Rate (Horizontal) | |||
Margin of Safety | 8.00% | 9.00% | 10.00% |
20% Premium | $ 107.19 | $ 54.00 | $ 36.25 |
10% Premium | $ 98.26 | $ 49.50 | $ 33.23 |
Intrinsic Value | $ 89.32 | $ 45.00 | $ 30.21 |
10% Discount | $ 80.39 | $ 40.50 | $ 27.19 |
20% Discount | $ 71.46 | $ 36.00 | $ 24.17 |
Video Tutorial: How to Read the Stock Cards DDM Valuation
Market Cap | 3,470 B |
PE Ratio | 34.75 |
Fwd PE | 30.65 |
Price to Book Ratio | 52.05 |
DDM Valuation | 45 |
Average 5-Yr PE | 28.77 |
Value Score | 13 |
Please note that:
- All financial metrics are updated weekly.
- The DSR PRO rating and Dividend Safety Score are updated quarterly.
- The analysis (investment thesis, risk potential, dividend growth perspective and DDM calculation) is reviewed every 6 months.
- The PDF format includes only comments (no metrics) and is reviewed every 6 months.