Apple (NASDAQ:AAPL) continued to grow its ecosystem and repurchased billions of shares, which may reward shareholders more in the future. In this clip from “The Rank” on Motley Fool Live, recorded on April 25Motley Fool contributors Zane Fracek, Matt Frankel and Jason Hall discuss whether Apple is a buy today at its current valuation.
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Zane Freck: It continues to impress me how much money he can make. And some people will say that they’re kind of out of those projects that are going to give them a positive return on their investment because the barrier for them to invest money is so high, isn’t it? People say maybe they’ll get an Apple car or something, but I think that’s very unlikely, just because the margins there would probably be way lower than the way the business is currently managed. So they better not do it. But that said, they’re finding things they can do like Apple TV, which has been around for a long time, but is still growing really fast, right? He doubled his number of subscribers. I’m sorry, it was Apple Pay with cardholders. So you can get the Apple card. It’s another part of their ecosystem that they’re building. The number of cardholders doubled in 2020 to 6.4 million. Now they have 25 million subscribers on Apple TV, so they are building a strong ecosystem. Their profitability increases. They made $93 billion in free cash flow and, I don’t think they’re done there. I think they’re going to continue to steadily increase their revenue by about 10% a year, which we’ve seen. Now that they are more vertically integrated, designing their own M1 chip, I think that will help them and allow them to increase their margins. On top of that, as we talk a lot about how these companies reward shareholders, and I think Apple is doing a pretty good job with that, buying back billions of shares and billions in dividends while sitting on a huge pile of cash. This could therefore be even more rewarding for shareholders in the future. The one stat I saw was just amazing to me just recently I think over the last two years they’ve bought back so many shares they’ve reduced the total number of shares outstanding by 25 %, which is really will increase everyone’s stake in the company and reward shareholders. That’s why it’s my number 1.
Matt Frankel: I ranked it well even though I sold Apple about six months ago. It’s a powerful business. I don’t think anyone would go wrong owning it today. I see limited upside potential from here, but it’s a perfect Buffett stock in that regard. It’s one of the stickiest companies in the world, the most pricing power of any consumer electronics company I could name in history. It’s just a fantastic company in every way.
Jason Hall: The way I think of Apple is, again, at this assessment, even with all of these positive things, I have a much higher belief in Berkshire (NYSE: BRK.A) (NYSE: BRK.B) and I would get my exposure to Apple by owning Berkshire. That’s how I think about it.
Jason Hall has no position in any of the stocks mentioned. Matthew Frankel, CFP® holds positions in Berkshire Hathaway (B shares). Zane Fracek has no position in the stocks mentioned. The Motley Fool holds positions and recommends Apple and Berkshire Hathaway (B shares). The Motley Fool recommends the following options: $200 long calls in January 2023 on Berkshire Hathaway (B shares), long $120 calls in March 2023 on Apple, short $200 calls in January 2023 on Berkshire Hathaway (B shares) , short calls of $265 in January 2023 on Berkshire Hathaway (B shares) and short calls of $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.