The Company in a Nutshell
- Apple depends on the iPhone’s growth to generate the bulk of its cash flows.
- The company generates about 40% of its revenue in the Americas and 60% internationally.
- Apple shares its wealth with shareholders through dividend payments and share buybacks but still keeps large amounts of cash on hand.
| Date Reviewed | 05/03/2025 |
| Company Name | Apple Inc |
| Symbol | AAPL |
| Sector | Information Technology |
| Industry | Consumer Electronics |
| Beta | 1.21 |
| PRO Rating | 5 |
| Dividend Safety | 4 |
Business Model
Apple Inc. designs, manufactures and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related services. Its product categories include iPhone, Mac, iPad, and Wearables, Home and Accessories. Its software platforms include iOS, iPadOS, macOS, watchOS, visionOS, and tvOS. Its services include advertising, AppleCare, cloud services, digital content and payment services. The Company operates various platforms, including the App Store, that allow customers to discover and download applications and digital content, such as books, music, video, games and podcasts. It also offers digital content through subscription-based services, including Apple Arcade, Apple Fitness+, Apple Music, Apple News+, and Apple TV+. Its products include iPhone 16 Pro, iPhone 16, iPhone 15, iPhone 14, iPhone SE, MacBook Air, MacBook Pro, iMac, Mac mini, Mac Studio, Mac Pro, iPad Pro, iPad Air, AirPods, AirPods Pro, AirPods Max, Apple TV and Apple Vision Pro.
| Current price | 195.62 |
| ROE | 174.60 % |
| ROIC | 77.10 % |
| Shareholder Yield | 0.00 % |
| 5-Yr Total Return | 132.20 % |
| 1-Yr Total Return | -8.00 % |
| Next Earnings Date | 07-30-25 |
Latest Quarter Information
What the CEO said:
“Today Apple is reporting strong quarterly results, including double-digit growth in Services", said Tim Cook, Apple’s CEO. "We were happy to welcome iPhone 16e to our lineup, and to introduce powerful new Macs and iPads that take advantage of the extraordinary capabilities of Apple silicon. And we were proud to announce that we’ve cut our carbon emissions by 60% over the past decade.” “Our March quarter business performance drove EPS growth of 8% and $24B in operating cash flow, allowing us to return $29B to shareholders,” said Kevan Parekh, Apple’s CFO.
What we say:
2025-05-02, Apple reported a good quarter with revenue up 5% and EPS up 8%, beating analysts' expectations. The growth was primarily driven by strong performance in the Services segment, which achieved a record $26.65B in revenue (+12%). iPhone sales rose 2%, bolstered by the launch of the iPhone 16e. Mac and iPad revenues increased by 7% and 15%, respectively. However, the Wearables, Home, and Accessories segment experienced a 5% decline, indicating potential market saturation or increased competition in that category. The EPS improvement reflects Apple's ability to manage costs effectively and leverage its high-margin Services business.
Investment Thesis
Apple remains one of the most dominant players in the consumer technology space, known for its vertically integrated hardware-software ecosystem. Its strategy revolves around premium device sales anchored by the iPhone, complemented by high-margin services and increasingly sophisticated chip design. Its AI-infused ecosystem—dubbed “Apple Intelligence”—enhances product stickiness and aims to extend upgrade cycles. With a market cap exceeding $3.2 trillion, Apple has evolved into a global cash machine supported by recurring revenues, brand loyalty, and operational efficiency.
Playbook:
Apple monetizes through hardware (iPhone, Mac, iPad, Watch), services (iCloud, Apple Music, Apple Pay, App Store), and now AI-driven capabilities. Its chip integration (A-series, M-series, and soon C1 modems) reinforces its proprietary edge. The firm outsources production but maintains tight control over design and software, allowing for scale without capital burden.
Growth Vectors:
Growth is shifting from hardware unit expansion to monetization per user. Services, now 25%+ of revenue, are growing at double digits. AI features like on-device intelligence are integrated into iPhones and lower-tier models like the iPhone 16e to spur retention and upgrade cycles. Wearables (Watch, AirPods) and the Vision Pro headset provide new device form factors. Expansion into India and Southeast Asia also supports long-term user base growth.
Economic Moat:
Apple’s moat is “wide” per Morningstar, driven by massive switching costs, brand loyalty, and an expansive ecosystem. Devices sync seamlessly, locking users into a multi-product environment that discourages churn. Custom silicon and developer network effects amplify its advantage, while vertical integration supports margin expansion.
Dividend Triangle
| 5-Yr Rev. Growth | 8.50 % |
| 5-Yr EPS Growth | 15.40 % |
| 5-Yr Div Growth | 5.50 % |
Potential Risks
Despite its strengths, Apple’s vulnerabilities are becoming more visible. It’s facing growth maturity in core products, geopolitical uncertainty in China and Taiwan, and regulatory pressures aimed at dismantling parts of its ecosystem. Valuation risk is also present, with shares trading at a 7% premium to fair value.
Business Vulnerabilities:
Over 50% of revenue still comes from the iPhone, exposing Apple to saturation risk. Management is addressing this via service bundling and new hardware (e.g., Vision Pro), but execution risk remains. The firm is also attempting to internalize modem production, which adds complexity to its R&D load.
Industry & Market Threats:
Regulatory challenges in Europe and the U.S. threaten Apple’s App Store take rates and exclusivity features like iMessage and Apple Pay. The firm's supply chain relies heavily on China (Foxconn) and Taiwan (TSMC), exposing it to geopolitical disruption. Tariff threats could also compress margins if exemptions lapse.
Competitive Landscape:
Apple competes with Samsung and Google in smartphones, Microsoft and Amazon in AI and cloud, and Spotify and Netflix in media. Apple’s differentiation lies in integration—others may lead in AI innovation, but Apple wins in user experience and security. However, generative AI breakthroughs from peers could erode Apple's lead in software functionality.
| Debt/Equity | 1.90 |
| Financial Debt to EBITDA (TTM) | 0.70 |
| Current Ratio (Quarterly) | 0.85 |
| Credit Score | 82 |
Dividend Growth Perspective
Apple’s dividend strategy isn’t about yield—it’s about long-term, sustainable growth. While its 0.45% yield is low, Apple compensates investors through massive share buybacks and steady payout increases. Low payout ratios and strong free cash flow ensure that dividends will continue growing, even if at a modest pace. Dividend Growth History: 11 consecutive years of dividend increases, but growth is slow relative to cash flow. 5-Year Dividend CAGR: 5.50%, lower than peers like Microsoft (10%) and Broadcom (15%). Future Expectations: Dividend Growth Forecast: 4%-6% annually, slower than Apple’s earnings growth (~10%). Yield at Current Price: 0.45%, which won’t attract income-focused investors.
| Dividend ($) | 1.04 |
| Dividend Yield Fwd | 0.50 % |
| Dividend Frequency | Quarterly |
| Average 5-Yr Yield | 0.55 % |
| Payout Ratio (%) | 14.65 |
| Cash Payout Ratio (%) | 15.55 |
| DGR 1-Yr | 4.15 |
| DGR 3-Yr | 4.85 |
| DGR 5-Yr | 5.50 |
| DGR Streak | 11 |
| Chowder Score | 6.00 |
| Next DVD PMT | 05-15-25 |
Valuation
| Recent Annual Dividend Payment | $ 1.00 |
| Expected Dividend Growth Rate Years 1-10 | 5.00% |
| Expected Terminal Dividend Growth Rate | 7.00% |
| Discount Rate | 9.00% |
| Discount Rate (Horizontal) | |||
| Margin of Safety | 8.00% | 9.00% | 10.00% |
| 20% Premium | $ 107.19 | $ 54.00 | $ 36.25 |
| 10% Premium | $ 98.26 | $ 49.50 | $ 33.23 |
| Intrinsic Value | $ 89.32 | $ 45.00 | $ 30.21 |
| 10% Discount | $ 80.39 | $ 40.50 | $ 27.19 |
| 20% Discount | $ 71.46 | $ 36.00 | $ 24.17 |
Video Tutorial: How to Read the Stock Cards DDM Valuation
| Market Cap | 2,964 B |
| PE Ratio | 28.05 |
| Fwd PE | 26.10 |
| Price to Book Ratio | 44.40 |
| DDM Valuation | 45 |
| Average 5-Yr PE | 30.23 |
| Value Score | 15 |