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Apple (AAPL) Stock Analysis
The Apple dividend has been paid continuously since 2012 and increased for 12 consecutive years; qualifying the company as a Dividend Contender.
Current Dividend Annualized: $0.96
Apple (AAPL) Intrinsic Value – Margin of Safety Analysis
(updated November 2023)
Normalized Diluted Earnings Per Share (TTM): $6.13
Free Cash Flow Per Share (TTM): $6.30
Cash Flow From Operations (CFO) Per Share (TTM): $6.99
Estimated Intrinsic Value: $117
Target Buy Price Based on Required Margin of Safety = $106
(Required Margin of Safety Based On Risk Stability Grade:
A = 10%, B = 20%, C = 40%, D = 60%, F = 80%)
Target SELL Price Based on Estimated Intrinsic Value = $140
(Allow Overvaluation Adjusted by Risk Stability Grade:
A = 20%, B = 15%, C = 10%, D = 5%, F = 0%)
Risk / Stability Grade: A
A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.
B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.
C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.
D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.
F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.
Financial Risk Grade: A
A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.
B grade indicates a very low probability for a dividend cut.
C grade indicates a low probability for a dividend cut and/or average safety risk.
D grade indicates there are issues that should be considered concerning future dividend payments.
F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.
Business Quality Grade: A
A grade indicates earnings quality is high or far above average.
B grade indicates earnings quality is good and/or above average.
C grade indicates earnings quality is acceptable or average.
D grade indicates earnings quality is poor and requires thoughtful due diligence.
F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.
Earnings Report: 9/30/23
AAAMP Portfolios Position Disclosures:
Dividend Growth & Income (DGI) – None
Treasure Trove Dividend (TTD) – None
Global Dividend Value (GDV) – None
Global Conservative Income (GCI) – None
Global Value (GV) – None
Global Value Aggressive (GVA) – None
Global High Yield (GHY) – None
Industry: Consumer Electronics
Apple designs, manufactures, and markets the iPhone, iMac, iPad, iWatch iPod, Apple TV, more than a million Apps, operating systems, iCloud, iTunes, ApplePay, accessories, service, and support for its products.
Initially Apple’s stellar growth record was due to its innovation and high quality products which yield a premium sales price. But as time goes by it’s becoming about their ecosystem.
The integration of Apple’s hardware, software, services, applications, etc. provide unmatched benefits to its users. With each generation of products Apple adds value through syncing these products to a greater degree.
Photos, projects, preferences, applications, media, etc. can be shared or copied among Apple devices with ease. This ecosystem is building a moat for Apple that its predecessors and competitors have not been able to achieve. The more Apple products a customer owns the less likely they will purchase a new, or replace an existing, product from a competitor.
Apple’s iPhone and iOS operating system are known for their quality, security, and integration abilities. These are the backbone of a successful product lineup and have given Apple the ability to obtain premium prices (high profit margins) for their favored brand.
Apple has a competitive advantage because of its sheer size and ability to vertically integrate. In other words, it controls manufacturing through ownership and/or extremely stringent standards, and owns its retail stores. This means it can control its component costs, maintain quality, and properly train its salespeople (excuse me, I mean “specialist” or “concierge” 😉 ) better than competitors.
In other words Apple’s core strength is its ability and understanding of how hardware, software, services, and third party applications are integrated into individual Apple devices so that customers are willing to pay a premium price for their products.
Technology is a brutal industry. Short product life cycles and fierce competition have knocked many industry leaders from their position. One product failure or mishap can do great damage to a brand in the technology industry.
Apple’s premium price strategy puts some limits on how large the company can grow. This is especially true in emerging and frontier markets where opportunities abound for the industry.
Apple will continue to strengthen its ecosystem by introducing, improving, and marketing new products. The Apple Watch, Apple Pay, and Apple TV are products that have increased integration and add value to the Apple user experience. The transition to 5G should provide another positive cycle for the Apple iPhone.
Competition. Apple is #1 right now, but that means everyone is trying to topple them through innovative new products or slashing prices. The current environment puts downward pressure on Apple’s high profit margin. Only constant innovation (to overcome short product life cycles), quality products and service, and greater ecosystem integration will allow them to maintain these high margins.
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While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.