From Morningstar: 2024-10-30 06:48:37

Apple is set to release its fiscal fourth-quarter earnings report on Oct. 31. Morningstar believes Apple’s stock is overvalued with a fair value estimate of $185 per share. They project 7% compound annual revenue growth for Apple through fiscal 2028, mainly driven by iPhone sales.

Morningstar assigns Apple a wide economic moat due to customer switching costs, intangible assets, and a network effect. They see a virtuous cycle between Apple’s affluent customer base and its ecosystem of developer partners, leading to great profitability and returns on invested capital.

Apple’s financial strength lies in its immense cash flow and net cash position of $51 billion as of September 2023. Management aims to become cash-neutral, but it may take time to achieve this goal. Apple has reduced its net cash position by more than half since announcing the target in 2018.

Morningstar gives Apple a Medium Uncertainty Rating due to its reliance on consumer spending and competition. The firm faces risks of disruption and geopolitical risks from its supply chain concentrated in China and Taiwan. Regulatory scrutiny may also impact parts of Apple’s ecosystem.

Bulls on AAPL praise its integrated ecosystem, in-house chip development, strong balance sheet, and cash flow to shareholders. Bears point to vulnerability to consumer spending shifts, geopolitical risks in the supply chain, and regulatory challenges impacting the ecosystem.



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