Apple (NASDAQ:AAPL) Business type: developer of desktop, laptop, and tablet computers, audio players, smartphones, software, and digital content. It is headquartered in Cupertino, California.
The stock is traded on NASDAQ. The company represents the Telecommunications Equipment industry in the Electronic Technology sector.
Beta = 1.37
Fundamental analysis
Debt Load
Debt ratio (ratio of all liabilities to all assets of the company) over three years:
- 85.6% in 2022
- 82% in 2021
- 79.8% in 2020
Conclusion: The debt load of the company is relatively high. Additionally, we should consider that it has grown significantly over the last three years. A horizontal analysis yields that the total debt growth mainly consists of the increased short-term debt generated by the development of accounts payable.
Capitalization of the company
The capitalization is $3.01T. The company's last reported asset value is nearly $352.8B. The book value of equity is $50.7B.
Conclusion: The market valuation of the business is significantly higher than the book value of assets and equity.
Income growth
The company's revenue and net profit growth rates for the three years:
2021 - 2022 revenue grew 7.79%; net income rose 5.4%
2020 - 2021 revenue jumped 33.26%; net income increased by almost 65%.
2019 - 2020, revenue jumped 5.51%; net income rose nearly 4%
Conclusion: Average revenue growth is 12%; median value is 7.79%. Of note is the surge in revenue growth in 2021 due to the economy coming out of lockdown after COVID-19.
Company price multipliers
P/E = 32.27 (industry median value 20.62)
P/B = 48.38 (median value 1.92)
P/S = 7.92 (industry median 1.39)
Conclusion: Comparative multiples are significantly higher than industry multiples. Particularly noteworthy is P/E, which is more than twice the company's revenue growth. The stock is quite heavily overbought.
Management effectiveness (5-year average)
ROE = 97.29%
ROA = 21.52%
Conclusion: The profitability figures are prohibitively high. The fact that the company deliberately pursues a policy of buybacks, thus reducing equity capital and increasing indebtedness, is one of the reasons for the high ROE and inflated capitalization.
The company’s dividends
The company does not pay dividends. The shares are categorized as growth shares.
DCF model
A discounted cash flow (DCF) model was built for the company.
Even taking a very optimistic estimate and assuming that the company's revenues will grow at an average rate of 12% over the next five years (which is unlikely), even at the current high discount rate (WACC) of 9.83%, the fair price of the stock is $128.20, with a current market price of $189.9.
Technical analysis
If we evaluate the long-term price chart, the upside potential remains.
The first long-term growth target is $197.90. If the bulls overcome this mark, the next target is $215.30.
The weekly chart below shows signs of correction. The price is testing the upper boundary of the regression channel, which signals an imminent bounce down. The downside potential appears in the range of $167.75 - $177.80.
Conclusions on Apple Stock
From a fundamental analysis point of view, the price of securities is significantly overvalued.
Factors causing the high value:
- Buybacks
- AI hype
- Relatively stable revenue growth for the last two years.
The stock's fair price is about $128.20, which means the company is overvalued by approximately 150%.
From the technical (speculative) point of view, growth potential remains. But for this to happen, first, the bulls must confirm their strength. Before growth continues, the price may correct. If there is no change in the trend (which, in my opinion, is reasonably likely), the next wave of growth may drag the price of Apple stock to $215.
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