A Look Back at Apple
Should I have taken a bite out of this Apple?
A little over a year ago I analyzed one of the biggest companies in the world, and one of the best generators of wealth in corporate history.
A year ago, I thought the company was undervalued, but I still refused to buy in. Today, the company’s share price has continued moving upwards, and I have missed out some of that return.
Was I wrong about not buying in? Have the company’s fundamentals remained, or deteriorated as I expected? Let’s find out!
You can read the original analysis here:
The Thesis
The first thing we need to take into consideration is to see what I thought about the company, and what my thesis for the investment was:
Apple is a high quality company
The company may suffer from regulatory action which may impact their moat
The company will likely have to dial down their buybacks
The company will likely reduce their topline growth
The company has no meaningful issues with debt servicing or refinancing
How has this held up?
Let’s take it point by point:
Apple is a high quality company with Huge Brand Value, Fantastic consumer loyalty, Great products, Good margins
This hasn’t really changed at all.
The company continues to have all of these characteristics and nothing has really changed.
Their net margins remain around 26%, their latest products have been well received (if expensive), and their consumers have remained loyal, though some slow down is beginning to show, even in the newly announced (not yet released) VR product.
It’s hard to compete with a company that has parents selling their children so they can afford the latest gadget!
The company may suffer from regulatory action which may impact their moat
Regulations have continued onwards, with Apple being under investigation for app tracking transparency, facing lawsuits regarding its 30% comission, and being targeted by the EUs recent Digital Services Act.
None of this is good, but all the same, it’s not unexpected.
The company will likely have to dial down their buybacks
This has happened, but not to a huge extent,
The dividends have continued growing as they have been over the past decade.
The company will likely reduce their topline growth
This has happened as well, with revenues over the past 4 quarters being lower than their comparable quarters by a not insignificant margin.
The company has no meaningful issues with debt servicing or refinancing
The company remains capable of generating massive amounts of cash, while their liabilities have remained more or less the same.
Nothing has changed here, nor has their ability to pay off their long term debt deteriorated in any meaningful way.
The future
I’ve missed out on significant gains in terms of share value, but somehow I can’t seem to regret my view earlier.
Yes, the company remains in good shape, but just how much can revenue grow? We’re already seeing issues there, as expected, and I really don’t like paying a 33 PE for a company whose growth is not expected to be that great.
It’s a good company, no doubt about that, but the price despite its apparent undervaluation, is so high that I have doubts.
For now, I’ll just keep my AAPL 0.00%↑ allocation to my world indexes. I’ll still get the exposure, while keeping my individual positions to companies I truly believe in.
My stance: HOLD
Do you own AAPL 0.00%↑ ? Let me know what you think in the comments below!