AAPL Stock: $4 Trillion Moat vs. D- Growth Grade | 2-Minute Analysis

Key Concepts

• Quant Rating: Seeking Alpha’s proprietary stock rating system.
• PEG Ratio: Price-to-Earnings Growth ratio – a valuation metric.
• EV to EBITDA: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization – a valuation metric.
• EPS Diluted Growth: Earnings Per Share growth, accounting for dilution.
• Net Income Margin: Percentage of revenue remaining after all expenses.
• Basis Points: A unit equal to one-hundredth of one percent (0.01%).
• Dividend Yield: Annual dividend payment as a percentage of the stock price.
• Dividend Safety: Assessment of the sustainability of a company’s dividend.
• Share Buyback: A company repurchasing its own shares.

Overall Ratings & Analyst Coverage

Apple (AAPL) currently holds a “Hold” rating from the Seeking Alpha Quant system. This is corroborated by Seeking Alpha analysts, who collectively also rate the stock as a “Hold” based on coverage from 11 analysts over the past 30 days. However, Wall Street analysts present a more bullish outlook, assigning a “Buy” rating based on coverage from 49 analysts over the last 90 days. Resources for understanding the performance of Seeking Alpha’s rating systems are available via a link in the video description.

Company Overview & Valuation

Apple is a $4 trillion market capitalization company operating within the Information Technology sector, specifically in the technology, hardware, storage, and peripherals industry. Its valuation grade is currently an “F”. This is supported by a PEG ratio of 1.60, significantly higher than the sector average of 0.97. While a PEG ratio under 1 is generally preferred, the higher ratio reflects investor willingness to pay a premium for Apple’s strong competitive advantage (“moat”). Further contributing to the low valuation grade are an EV to EBITDA ratio of 25.21 (compared to the sector’s 15.25) and a Price to Cash Flow ratio of 28.34 (compared to the sector’s 19.43).

Growth Metrics

Apple’s growth grade is a “D-”. Forward EPS diluted growth is 14.55%, slightly exceeding the sector average of 13.13%. However, year-over-year revenue growth was only 6.43%, underperforming the sector’s 9.19%. This indicates that while earnings are growing at a reasonable pace, revenue growth is lagging behind its industry peers.

Profitability & Momentum

Apple demonstrates strong profitability, earning an “A+” grade. Its net income margin stands at 26.92%, substantially higher than the sector average of 4.83%. The stock’s momentum is also positive. One-year price performance is 11.14%, significantly outperforming the sector’s 0.36% (36 basis points). Even the 3-month price performance of 5.40% surpasses the sector median, which is down 6.39%.

Revisions & Dividend Information

The revisions grade is a “B-”, based on recent analyst estimates. There have been 32 upward revisions and 6 downward revisions for EPS estimates, and 35 upward revisions and 2 downward revisions for revenue estimates over the last 3 months. Apple pays a dividend, but the current yield is low at 0.38% (38 basis points). The 5-year dividend growth rate is 4.99%. Dividend safety is rated “A”, and dividend growth is rated “A+”, indicating a strong and reliable dividend. However, the dividend yield receives a “D-” grade, largely because Apple prioritizes capital allocation towards a substantial share buyback program.

Important Disclaimer

The video concludes with a standard disclaimer stating that past performance is not indicative of future results and that Seeking Alpha provides informational content only, not personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker, investment advisor, or investment bank.