#1 Search By Financial Pros

We were surprised Apple (AAPL) was the #1 stock search by financial pros over the past month by a fairly wide margin.

The core portfolio holding for many investors faced three consecutive quarters of revenue declines, a rare occurrence.

Only China and Europe appear to be growing, with total sales in the U.S. slipping year over year.

It’s left many wondering if Apple, and thus the broader market rally, are skating on thin ice.

Apple’s Business

The largest company by market capitalization, Apple is a giant among mammoths.

There’s even been talk of them acquiring Disney (DIS), which Apple already has enough cash to buy the company outright!

Apple’s business breaks down into products and services as follows:

• iPhone (48.5% of revenues)
• Mac (8.4% of revenues)
• iPad (7.1% of revenues)
• Wearables, Home, and Accessories (10.1% of revenues)
• Services (25.9% of revenues)

While wearables and services saw revenue increases in the past year, all other categories experienced sales declines.

Currently, the Americas comprise 45.1% of revenues and 44.1% of operating income, followed by Europe at 25.7% and 26.9%, and then China at 20.1% and 20.9%, respectively.

Although iPhone sales are down, many wonder whether consumers are holding back, as they often do, before the iPhone 15 release.

Financials

Source: Stock Analysis

Apple sales exploded after the pandemic, giving it tougher comps for 2023.

However, the higher contributions from services helped the company improve its gross margins by 5% since 2019, which mostly translated to profit and free cash flow margins as well.

Now, $109 billion might seem like a lot of debt. However, the company holds $62.5 billion in cash along with $104 billion in marketable securities, covering its debt liabilities by a mile.

And with interest expenses at 3.5%, it’s better off investing the money than paying back debt.

Valuation

Source: Stock Analysis

Now, we felt it only fair to compare Apple to the other major stocks searches by financial pros.

Interestingly, Apple is one of the cheapest on a price-to-earnings and price-to-sales basis. 

On a price-to-cash flow basis, it’s on par with Microsoft (MSFT) and Amazon (AMZN).

Tesla (TSLA) and NVIDIA (NVDA) are more expensive, but have better growth prospects.

Growth

Source: Seeking Alpha

Apple’s forward-looking revenue growth isn’t anything to write home about. In fact, it’s a paltry 3.6%, while all its peers are forecasting double digit gains.

TSLA and NVDA expect to ride the EV and AI growth cycle for the next several years.

Despite heavy growth, both companies are relatively profitable and in Tesla’s case, reasonably priced.

Profitability

Source: Seeking Alpha

Now, Apple’s gross margins aren’t as high as software companies like Microsoft. But they are getting better.

Meanwhile, its EBIT margins are second only to Microsoft as is it’s net income margin.

Its free cash flow margin is the best of the bunch. Plus, it’s got an incredible return on equity, assets, and total capital.

Our Opinion 6/10

Apple’s a little rich for our tastes here.

We don’t like the look of the latest growth trends for the company either.

Other stocks like Tesla may trade at higher multiples, but they back it up with growth.

We’d rather be buyers of Microsoft or Tesla here, though these mega-cap companies could all do with a healthy pullback.