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About Apple
Iconic doesn’t really begin to even cover it.
As if this company needed any sort of introduction, this is the company of all companies, founded by one of the most prolific visionary entrepreneurs this world has ever seen.
He went by Steve.
Steve Jobs.
Founded in Jobs’ garage in Los Altos, California and with the help of fellow technology visionaries (AKA fellow nerds) Steve Wozniak and Ronald Wayne, Apple Incorporated was born and with it, the Apple I, one of the world’s first personal computers as we know them today.
You know how some people sit around and talk about how if one person didn’t exist and make the contributions they made, that other visionaries, innovations and advancements wouldn’t have ever been possible? This is the exact and unequivocal case with Steve Jobs, as without him, avenues and shear concepts of technology, media, communication, and truly in more respects than one, our relative perspectives of the world around us would not be what they are today without his company’s multiple inventions rooted tremendously in its entrepreneurial, innovation-crazed DNA.
From the Apple I, the company tinkered with, designed and ultimately manufactured and sold a refined iteration of the Apple I and new and improved products such as the Apple II, Apple III, Apple Lisa, the Macintosh, and then the iPod officially coming onto the scene in 2001, followed by the founding and formal distribution of iTunes, the iPhone being introduced in 2007, the iPod Touch during the same year, the iPad in 2010, the Apple Watch in 2015, AirPods in late 2016, many of these enduring subsequent versions and updates, leading to its most recent, new and exciting product, its Apple Vision Pro, as it, like many other large and famed technology companies, is drifting closer and closer into virtual reality (VR) territory.
Given the lineup of these products, if Apple’s products haven’t proven themselves to be among the stickiest, most used and hard-to-quit using products on the face of the planet, I simply don’t know what is.
Now, as a sort of reference, the company’s largest revenue driver comes from the iPhones it sells, accounting for just over half of the entire annual revenues Apple reports, along with sales generated through its vast and deep services segment, including obtaining revenues through its subscription packages through its more than established platforms such as Apple Music, Apple TV+, iCloud as well as the company’s iconic App Store, with the rest of the company’s revenues being produced through the sale of more supplemental but still staple products, like iPads, Macs, AirPods and Apple Watches.
Evidently, on all of these fronts, the company, even though it is a large trillion-dollar one, faces a lot of stiff competition from the likes of Disney (television and movie streaming), Spotify (audio streaming), Samsung (smartphones), Google (smartphones), Dell Technologies (computers), and you already most definitely know it is true when I say many, many others.
While the competition is fierce, Apple has been and in so many respects still remains the cream of the crop.
Although this company will forevermore have a gigantic target on its back, whether it is from regulators, competitors and plenty of other global enterprises and agencies, the truth of the matter is that Apple Incorporated is one of the most valuable companies in the world and serves a very large and diverse customer base.
Being such a large and relied upon company does come with certain territories including not (in my opinion, at least) being as recession proof as people might be predisposed to think it is, however, I will admit that many of these sorts of sensitivities can be somewhat balanced out by virtue of this company having so many different (yet focused) largely dependable revenue streams, and also the gumption to cut losses on projects that are not proving to bear enough fruit.
Apple’s recently abandoned car venture being a prime example.
With the artificial intelligence (AI) revolution just still hardly upon us, it can also be said that there are a trove of opportunities for a company such as this one, but before making too many large, blanket statements, allow me to formally introduce Apple Incorporated through its core financials, in the greater overall context of being a long-term investment candidate.
Apple’s stock financials
Being the big, bad trillion-dollar company that Apple has become over the years, it is only fitting that its market capitalization stands at a mind-boggling $3.44 trillion, being nothing but a staple in terms of being in the top five of all companies on the planet in terms of highest valued at the moment. In addition to its astronomical market capitalization, Apple also boasts a stock price of $226.05 and also maintains a present price-to-earnings (P/E) ratio of 34.42 and also pays out an annual dividend of $1.00 to its shareholders, paying exactly a quarter each quarter. The most pressing matter here is the company’s price-to-earnings ratio, and while there is no doubt in my mind that this company has many different tangible ways in which it can grow its top-line and bottom-line, it is my initial thought that Apple has some growing to do in terms of specifically fully fitting into its current valuation. Perhaps the company’s revenues are growing at a rapid enough annual rate to justify paying a bit of a premium for an ownership piece in the company, however, the only way we will know with more certainty whether or not this is the case is by primarily checking its income statement and its revenues therein.
Prior to that, let’s briefly take a quick glance at the general physique of Apple’s balance sheet.
Specifically, Apple’s executive team is responsible for and at the helm of approximately $352.5 billion in terms of total assets along with just about $290.4 billion in terms of total liabilities, which in all honesty is a fairly comforting overall balance sheet breakdown between its cumulative assets and liabilities. Namely, the company has a more than solid amount of cash at its disposal within the deeper context of its assets and its assets outweigh its liabilities by a nice margin too, alluding to the fact that this company isn’t likely to find itself in any major financial turmoil anytime soon and also displaying that it is fit and equipped to grow and invest aggressively when it should.
Now onto the company’s income statement, Apple’s annual revenues stemming from circa 2019-2023 have generally grown on a year-over-year (YOY) basis, starting out a relative low point of $260.01 billion (2019) and a high note of $394.3 billion, as reported in 2022, experiencing a subsequent transitionary period of revenue softening in its latest reported figure (2023), dribbling down a bit to $383.2 billion.
This mild decrease in revenues between 2022 and 2023 doesn’t exactly put me in the best mood to overpay for this company’s stock (NASDAQ: AAPL), that’s for sure.
Like at all.
While this revenue range is still rather impressive, especially when considering just how large and un-nimble of a company this one has naturally become, I can’t look myself in the mirror with a serious face and justify overpaying for a stake in the company on the sole basis that it has experienced softening in annualized revenues in its most recent years.
Regarding the company’s cash flow statement, Apple Incorporated’s total cash from operations during this exact same time period have been fairly commensurate trend-wise as its previously stated revenues, also (as expected) experiencing a bit of a decline between 2022 and 2023. Nevertheless, the company’s total cash from operations have been quite strong, standing at $80.6 billion in 2020 and reporting its latest figure of $110.5 billion, as shown in 2023.
It appears as though Apple has a pretty healthy margin, and frankly, as it should.
Apple’s stock fundamentals
As can also be found directly on Charles Schwab’s platform, Apple’s net profit margin is pegged at 26.31%, hanging at seemingly just where it should be with some of its most direct competition touting yet another solid margin of 27.49% (Alphabet, the parent company of Google), for example.
This was the ultimate “supposed to happen” scenario, as Apple Incorporated has extraordinary brand power and knows just how to properly leverage it with consumers and suppliers, which surely allows it to fatten its margins as much as it practically can. And don’t call me Shirley.
Should you buy Apple stock?
This is such a unique company and it has undoubtedly become foundationally essential to lives basically anywhere and everywhere in the developed world.
But you already knew that, probably because there’s like a 33% chance that you are reading this exact stock analysis article from your iPhone, iPad or MacBook.
From a more technical and objective standpoint, Apple’s stock (NASDAQ: AAPL) appears to be a bit pricey, even when considering its recent annual revenue growth (and the most recent slowdown, too, no doubt), and although its net profit margin is healthy as a horse, its cash flows are in good shape, its revenues are good and growing for the most part and its balance sheet is in a sweet spot, the valuation is a problem for me here and on the primary basis of valuation, it makes the most sense for me to lend Apple’s stock a “hold” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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