Apple Inc.

AAPL  Details

Apple Inc. (NASDAQ: AAPL) creates, produces, and sells smartphones, tablets, wearables, accessories, and other connected products. The company's most popular goods are the iPhone, Mac, iPad, Wearables, and home accessories. According to market capitalization, Apple Inc. is the most valuable firm in the world.

Latest News:

• New Ipad Upgradation: On June 6, 2022, the company released iPadOS 16, a substantial upgrade that enhances the versatility of the iPad with powerful new productivity and collaboration features.
• Launch of Completely Redesigned MacBook: Apple unveiled a revamped MacBook Air® and an upgraded 13-inch MacBook Pro® on June 6, 2022, both driven by the new M2 processor, which improves on the groundbreaking performance and capabilities of the M1 chip.

Financial Highlights: Q2FY22

• Record Top Line Performance: Due to strong client demand, the company recorded revenues of USD 97.3 billion in Q2 FY22, up 9% from USD 89.58 billion in Q2 FY21. In addition, the gross margin improved to USD 42.55 billion from USD 38.08 billion previously.
• Net Income and EPS Growth: The company's net income in Q2 FY22 was USD 25.01 billion, up from USD 23.63 billion in Q2 FY21, resulting in an increase in EPS to USD 1.54 per share from USD 1.41 per share.
• Balance Sheet Poised for Future Growth: The company has total cash of USD 28.08 billion and outstanding debt of USD 103.32 billion as of March 26, 2022, down from USD 109.10 billion on September 25, 2021. The company's asset/equity ratio was 5.20x in Q2 FY22, compared to the industry median of 1.98x, indicating a rise in total assets over liabilities. Furthermore, a spectacular 30.7% reinvestment rate in Q2 FY22 compared to the industry norm of 1.8%, leading the balance sheet to achieve new milestones.

Key Risks:

• Supplier Concentration Risk: The AAPL has significant supply and pricing concerns since specific components are acquired from a single or limited supplier. Many components, especially those sourced from numerous sources, are subject to industry-wide shortages and significant commodity price variations occasionally, which can have a materially adverse impact on the company's business, results of operations, and financial condition.                                                      

Valuation Methodology: EV/Sales Multiple Share-Based Relative Valuation

 Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.            

Stock Recommendation:

During the quarter, the company's excellent operating performance generated over USD 28 billion in operating cash flow, allowing it to repay approximately USD 27 billion to shareholders. The board of Apple had declared a cash dividend of USD 0.23 per share of the company, up 5%, paid on May 12, 2022. The stock has dropped 24.07% in the last six months, with 52-week highs and lows of USD 182.94 and USD 127.07.

Considering the top-line growth, decent gross margins, robust ROE, and present valuation. We recommend a “Buy" rating on the stock at the current market price of USD 131.88 as of June 13, 2022, at 01:15 PM PDT.

1-year technical chart as of June 13, 2022, at 01:15 PM PDT, Source: REFINITIV. Analysis by Kalkine group

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.