Apple Inc. (AAPL)
188.58 0.43000000000001 (0.23%)
Sector: Information Technology
Published by Capital Market Laboratories on 2018-05-26

What does this rating mean?
STOCK RETURNS
3Mo: +7.5%   |   6Mo: +7.8%  |   12Mo: +22.6%

TECHNICAL RATING
10DMA: $187.6  |  50DMA: $175.7  |  200DMA: $169.0
What does this rating mean?

Fundamentals

Measures of how large Apple’s market cap has grown are the flavor of the month on social media. Apple is larger than the GDP of over 100 countries. Apple’s market cap is larger than TARP. Apple’s market cap is 40% larger than the US defense budget. In fact, here's a wonderful chart that plots Net Income (TTM $millions) on the y-axis and Market Cap ($millions) on the x-axis for the largest companies in North America in all sectors. We can see how extraordinary AAPL's size has become.


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But the reality of how AAPL did it, is even more important. Apple had smaller earnings than both Microsoft and Google in 2007, then the iPhone released (June 2007) and Apple's earnings are now several fold the size of both of those companies. Since 2009, Apple has seen its market cap rise from ~$75 billion to ~$750 billion. No company has ever done that in any period of time.

Apple creates want better than any firm ever, and then sells to that want better than any firm ever. It has created as strong a brand loyalty as any firm ever, and through the generations of products has an immense base of customers that continues to grow at double digits even at already staggeringly high numbers. 48,000 apps are downloaded by Apple users a minute. The risk now is simply scale. All eyes are on the Apple Watch, Apple Pay, the "Apple Car" and Apple TV.

Technicals   |   Support: 186.31   |   Resistance: 188.59   

Golden Cross Alert: The 50-day MA is now above the 200-day MA.
Swing Golden Cross Alert: The short-term 10 day MA is now above the 50 day MA.

AAPL has a five bull (top rated) technical rating because it's trading above its 10-, 50-and 200- day moving averages and the stock is up on the day.


EARNINGS ESTIMATES
Earnings Date EPS Revenue (Mean) Revenue (Median) Last Quarter (Actual)
2018-05-01 $2.71 $ M $ M $61,137.0 M Provided by ZACKS



Fundamentals Rating Summary



METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Revenue (TTM US$ Millions) 247,417 220,457 227,535

Operating Margin (QTR) 1.351 1.36 1.38 FALLING

Net Income (TTM US$ Millions) 53,318 45,730 50,678

Levered Free Cash Flow (TTM US$ Millions) 49,884 42,944 49,360

Research and Development (US$ Millions) 3,378 2,776 2,511 RISING

Research and Development Expense/Revenue 0.055 0.053 0.050 RISING




Stock Returns and Chart


AAPL is up +7.5% over the last three months and up +7.8% over the last six months. The stock price is up +22.6% over the last year.

Before we dig into the fundamental trends that drive the rating, let's look at a two-year stock chart with regression channel and 10-day momentum (on the bottom).

Note: You can change time horizons by clicking the or buttons near the bottom of the chart. You can examine a one minute day trading chart by clicking the at the top left corner of the chart.

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Now let's examine the visualizations of the critical financial measures.


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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Revenue (TTM US$ Millions) 247,417220,457227,535

Revenue (TTM) is trending higher meaning that it has increased for at least five consecutive quarters (we can see the trend in the chart below the analysis).

Revenue over the trailing twelve months (TTM) for AAPL is rising. For the most recent (annual) period the company reported $247,417 (millions) from $220,457 (millions) a year ago, or a 12.23% change. The two-year change in revenue (TTM) is $19,882 (millions) (a 8.74% change).

What do all these numbers mean?
AAPL's fundamental rating benefited these results:
1. The one-year change was positive (but no extra points were given for a large percentage increase).
2. The two-year change was positive.
Finally, the up trend (consecutive quarters) in revenue benefited the fundamental (star) rating.

Let's look at Revenue (TTM US$ Millions) in the chart below.


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Revenue (TTM US$ Millions) Peer Chart


Let's look at Revenue (TTM) for AAPL versus its peers (GOOGL, MSFT) in the chart below. Note that you can use your own hand chosen peers by clicking on the link below the chart.


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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Operating Revenues/Operating Expense 1.3511.361.38FALLING

Operating Revenues/Operating Expense
Operating revenue over operating expense simply shows us how much revenue (in dollars) is generated for every dollar of expense. The ratio must be (at a minimum) above 1.0 in order for a company to turn an operating profit. For the latest quarter AAPL showed a ratio of 1.351.

What do all these numbers mean?
A year ago Operating Revenues/Operating Expense was 1.36. In the last year we can see operating margins are decreasing but are greater than 1.0 for the most recent period.

AAPL's fundamental rating was affected from the operating margin numbers in two ways:
1. The current value is above 1.0 (the firm generates an operating profit).
2. The one-year change was negative (lowers the rating a little bit).

Let's look at Operating Revenues/Operating Expense in the chart below with the total assets in the orange line.


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Revenue per Employee


Before we turn to earnings and cash flow analysis, let's look at a different view of revenue on a scatter plot with peers for some perspective. On the x-axis we equal space the companies and on the y-axis we plot revenue per employee (TTM) in $millions. For this chart, the upper right hand corner is "best" and the lower left hand corner is "worst." The company with the top revenue per employee is marked in green. -->

AAPL 's value is $1.86 million per employee (find it on the y-axis).



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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Net Income (TTM US$ Millions) 53,31845,73050,678

Net Income (after tax profit) over the trailing twelve months (TTM) for AAPL is rising. For the most recent trailing-twelve-months (TTM) the company reported net income of $53,318 (million). That's an increase in the most recent year from $45,730 (million) or a 16.59% change.

Net Income (TTM) (aka annual earnings) is trending higher meaning that annual earnings have increased for at least five consecutive quarters.

In our next chart we plot Net Income (TTM US$ Millions) in the blue bars and the quarterly results in the gold line. Note the rising bars from a year ago (four quarters ago).


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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Levered Free Cash Flow (TTM US$ Millions) 49,88442,94449,360

Levered Free Cash Flow (TTM US$ Millions) is a critical determinant of stock price since market cap is the present value of all future free cash flows. For AAPL the metric is rising (it was $42,944 million last year). For the most recent trailing-twelve-months the company reported Levered Free Cash Flow (TTM US$ Millions) of $49,884 million. That's an increase in the most recent year from $42,944 million or a 16.16% rise.

This cash metric is up $524 million from $49,360 million two-years ago.

Levered Free Cash Flow (TTM US$ Millions) is trending higher meaning that it has increased for at least five consecutive quarters (the annual number). This is an unusual occurrence and has a positive impact on the fundamental rating for AAPL

For our next chart we plot Levered Free Cash Flow (TTM US$ Millions) in the blue bars through time. Note the rising bars from a year ago (four quarters ago).


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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Research and Development (US$ Millions) 3,3782,7762,511RISING

Research and Development (US$ Millions) in the most recent quarter for AAPL was $3,378 million. R&D is rising (21.69%) from last year's value of $2,776 million. Further, we can see that R&D today relative to two-years ago is increasing (34.53%) from $2,511 million.

R&D per dollar of revenue for the latest quarter is $0.055. Last year this measure was $0.053 (it's rising).

In our final time series chart we plot Research and Development (US$ Millions) in the blue bars. Note the rising bars from one-year ago.


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Tale of the Tape


In our final visualization, we take a look at nine critical fundamental measures (many of which we have examined above), comparing AAPL to three more peers (GOOGL, MSFT, and FB).


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