Apple Inc. Corporation Analysis
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Apple Inc. Corporation Analysis
Introduction
Apple Inc. is a technological company in the United States of America that has its headquarters in Cupertino, California. The Company operates in designing, developing, and selling of computer electronics, online services, and computer software, among other products. It is one of the big four technological companies in the world which includes Amazon, Microsoft, and Google. Apple Inc. is considered a public company because it trades in NASDAQ Global Select Market using AAPL as its ticker symbol (NASDAQ:AAPL, n.d.). It has also been said to have the lucrative deals in the stock exchange market. As for now, Apple Inc. stocks are 26% above the buy point. The financial position of the Company is healthy since as per the 2019 financial year, the Company recorded the net income of 59.53 billion, which was an increase from 2015 where the net income was 53.39 billion. The current stock prices of the Company are US$287.73, which is +9.15 (+3.28%) from the previous year (NASDAQ: AAPL, n.d.). Since Apple Inc. is a public company, this paper will evaluate it from the perspective of the fixed-income securities and the equity securities. While analyzing the topic, the paper will be keen on the areas such as the current financial health status of the Company, trends of the financial health over the recent years, comparing the Company with its main competitors, factors affecting the industry, and analyzing the Company’s position within the industry.
Fixed Income securities of Apple Inc
Fixed income securities can be defined as the kind of an instrument of debt which has its returns inform of fixed or regular payments interest and the principal repayment of the principal when the security matures. The examples of fixed income securities include the bonds, saving bonds, and treasury bills, among others. The fixed-income security differs with the equity income security on the grounds that the equity income security trades shares and securities on the stock exchange terms, which have a high risk because of the trade fluctuations. Apple Inc. has been analyzed as one of the largest public companies in terms of the stock market. As per the 2018 financial year, Apple Inc. had an estimated debt of $1000 (NASDAQ: AAPL, n.d.). The increased debt is contributed by the Company offering large and short term bonds which sound a lucrative business for the investors.
Currently, purchasing the Apple Inc. bonds would not yield a lot of profit. The maturity period of the fixed income securities for apple is currently in 2025 (NASDAQ: AAPL, n.d.). This is when most of the public companies which have their bonds mature. This means that there might be a lot of competition from the investors. The people who seem to benefit from the Apple bonds are those who have their maturity dates in 2030-2040 Apple Inc. (NASDAQ: AAPL, n.d.). For instance, if one gets a bond today with the maturity year of 2030 at the interest of 3.0% that will sound a good business. In this case, the investor can sell the bond to the other party before the maturity date hence becoming an important thing to have the fixed security with the Apple Inc. In this case, I would advise the investors with Apple Inc. to purchase the bonds in the long run but not in the medium run.
The Equity Securities of the Apple Inc
On the other end, equity security trades shares and securities on the stock exchange terms, which have a high risk because of the trade fluctuations. It can also be said that the equity securities represent a claim that is based on the earnings and the assets of the Company. The common stock is an example of equity security. The other common types of equity include the owners stock, common stock, preferred stock, retained earnings, among others—currently, the total stakeholder’s equity for the Apple Inc. The Company stands at $96.5 billion. The value includes the $43.4 billion par value of the common stock and the other paid-in capital of the retained earnings. $639 million of the comprehensive income is also deducted from the value.
As per now, Apple Inc. has its shares hitting high all the time. In November 2019, the Apple stock reached 57%. The Apple Inc. stock in most of the times is bought at the beginning of the year. During this time, the prices tend to be low, but with time as the Company increases its stock, the prices rise, and from that point, one can sell its shares (Cortez et al., 2015). This seems to be a good business for many investors. Most of Apple’s Stock subscribers have claimed that the best period of buying the shares is when the year is starting and then sell them in the mid-year when the prices rise. From my point of view, I can advise the investors to buy and sell the equity securities in the short run since the prices keep in fluctuating. The most convenient period of buying is when the years are starting and sell them at the end of the year.
The Current Financial health status of Apple Inc and its trends over the recent years and future prediction
As for now, Apple Inc is considered to be financially stable. According to its 2019 quarterly financial report, Apple Inc registered the net revenue of $53.8 billion, which was an increase of 1% from the previous financial year (NASDAQ: AAPL, n.d.). The total earnings per the diluted share were registered to be $2.18, and it was down by 7% compared to the previous year. In addition to that, international sales were recorded to be 59% of the total revenue (NASDAQ: AAPL, n.d.). The positive performance during 2019 was contributed by the IPad, Mac, and iPhone products. Apple Company returned around $11.6 billion to its shareholders, which included $17 billion obtained from the open market repurchases of more than 87 million Apple shares. The Company also predicted the fourth quarter of the financial year to have the total revenue of between $61 billion and $64 billion which will mean the gross margin of 37.5 to 38.5%; the operating expenses were estimated to be between $8.7 billion and $8.8 billion. The other income was estimated to be $200 million and the tax rate of $200 million and the approximate tax rate of 16.5%. From the 2019 financial information of Apple Inc, it can be said that the Company is financially stable (NASDAQ: AAPL, n.d.). It keeps on advancing a year to the year. The Company has most of its sales from cell-phone products such as IPad and iPhones. That is why Apple Inc. has been ranked as the giant Company in the technological industry. With that pace, Apple Inc. Company will continue to record the positive financial results which translate the business as successful. Other financial analysis of the Apple based on Analysis of Short-term (Operating) Activity Ratios and the analysis of Long-term (Investment) Activity Ratios are elaborated by the images in the appendix section.
Comparing Apple Inc. with its main competitors
As had been stated earlier, Apple Inc. is a technological industry whose main competitors are Google, Microsoft, and Amazon. In the field of business, they are classified as technological giants. The giant industries have the following net worth; Google Inc., USD$136.36, Amazon, US$280.522 Billion (Google: Quarterly revenue 2019, n.d.), Microsoft $125.8 billion (Microsoft 2019 annual report, n.d.), and Apple Inc., 260.2 billion USD Apple Inc. (NASDAQ: AAPL, n.d.). The above revenue was in the financial year 2019. From their total revenue, you can find that Amazon is leading, followed by Apple, then Google, and finally Microsoft. The total revenue from the three giant technological firms does not differ a lot, meaning that the competition is stiff. For Apple Inc. to deal with the competition, it has been strict in adapting with modern technology. We have observed this through the regular update of the IOS. The modern IPad and iPhone are not like the ones which were originally modified. The statistical sales of the IPad and iPhone have been increasing at an alarming rate since 2014. The Company has also invested in modern digital advertisement techniques. When you look at the different social media platforms, you will find out that there are many adverts of Apple Inc. Through this, the Company has been able to reach as many customers as possible. With the rate of expanding, Apple Inc. can be predicted to become the market leader.
Factors affecting the technological industry
Technological industry has been termed as one of the most paying industry in the modern world. According to the statistics, there are more than 50 technological firms in the United States of America. The main competitive power of the industry is how you adapt to the changing technology (Henry & Robinson, 2015). When you look at the modern society, the technology keeps on changing every time. Sometimes when the Company is not careful with the technology, its services may become obsolete and lose the customers. Some of the challenges the technological industry is facing today may be associated with the changing technology, economic crises, political crises, and the legal issues. On the point of economic crises, most of the technological companies are operating in the global market. Some markets may have the economic sanctions which prohibit the international companies from operating into their countries (Jeong & Yoon, 2015). This makes the Company finds it difficult to reach out to the country with those crises. In addition to that, some countries may have been facing inflation. As a result, the technological firms may raise the prices of their products hence being affected by the inflation (Westerman et al., 2016). On the political issues, the country where the technological firms may be operating may have the political crises which affect the normal operations of the business. Such crises may include corruption, and the long legal procedures of acquiring the license. The legal problem, technological companies sometimes finds it difficult to observe the law of the countries of their operations. They are sometimes forced to change their long term strategies in order to cope up with the law. In summary, the technological firms are faced the global issues affecting the economy of the countries they are operating in.
The Companies position in the industry
As per the total revenue of the giant firms in the technological firm, we have seen that Apple Inc. is the second in terms of the total revenue. This means that the Company is yet to become the market leader in the industry. According to the new strategies which the Company has put in place, there is a hope that with time, the Company is becoming the market leader. For a firm to become a market leader, it has to have the competitive strategies (Nwogugu, 2015). In this case, Apple Inc is having the promising strategies which are able to surpass its main competitors. Some of the strategies the Company is using include the easy ways of adapting the technology, application of the digital marketing strategies in their advertisements, keeping on changing the management strategies, and thoroughly reading the market before investing. In addition to that, the Company has been updating its products depending on the customers’ specifications. Through this, they have been able to win the loyalty of many customers and claim the new ones. The Company has also diversified its products and operations in many parts of the world. The Company is also designing the products which can be afforded by all sorts of people depending on their class. This has made the Company win all classes of people from the poor to the rich. Finally, the Company has a very good website where they display their products for the customers to purchase. They have also developed techniques where the clients may ask the questions about the products and get the response immediately. With those strategies, the Company has a high probability of becoming market leaders in the future. The gap between Apple Inc. and the Amazon Inc. is small and having all those strategies, they are soon becoming the market leaders.
Conclusion
From the above analysis of Apple Inc., it can be noted that the Company is one of the fast-growing in the technological industry. It has invested in the stock exchange market trading as AAPL hence becoming the Public Limited Company (Yoffie & Baldwin, 2018). The paper has analyzed several areas in the stock market and also the technology industry as a whole. The analysis of the fixed-income securities has been carried out while determining whether to buy the bonds on the long term bases or short term bases. From the research, the paper concludes that purchasing the fixed income securities on the long term bases is the good business as per now. On the equity securities, the paper has also analyzed on the bases of purchasing on the long term bases or short term bases. One advantage analyzed about the short term bases is that the prices of the stock keeps on changing and might change in the future; hence the investor experiencing loss. The paper has gone ahead to analyze the financial position of Apple Inc. and also predicted its future position while indicating that it would be probably positive. The paper also tackles the competition analysis of the technological industry. The giant technological firms such as Amazon Inc. Google Inc. and Microsoft Inc. have been selected for comparison. Finally, the paper has analyzed the general challenges facing the technology industry and how the companies have been dealing with it.
Appendix
Figure 1: Apple Ratios
References
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Apple reports record first-quarter results. (2020, January 28). Apple Newsroom. https://www.apple.com/newsroom/2020/01/apple-reports-record-first-quarter-results/
Cortez, M. A. A., Ikram, M. I. N., Nguyen, T. T., & Pravini, W. P. (2015). Innovation and financial performance of electronics companies: A cross-country comparison. Journal of International Business Research, 14(1), 166-179.
Google: Quarterly revenue in 2019. (n.d.). Statista. https://www.statista.com/statistics/267606/quarterly-revenue-of-google/
Henry, E., & Robinson, T. R. (2015). Chapter 1. Financial Statement Analysis: An Introduction. CFA Institute Investment Books, 2015(2), 1-35.
Jeong, Y., & Yoon, B. (2015). Development of patent roadmap based on technology roadmap by analyzing patterns of patent development. Technovation, 39, 37-52.
Kim, E. (2020, April 30). Amazon’s Q1 profit misses Wall Street estimates even as sales Jump on a surge in consumer demand. Business Insider. https://www.businessinsider.com/amazon-earnings-report-q1-revenue-profit-2020-4
Microsoft 2019 annual report. (n.d.). Microsoft – Official Home Page. https://www.microsoft.com/investor/reports/ar19/index.html
Nwogugu, M. C. (2015). The Case Of Apple, Inc., and Fintech: Managerial Psychology, Corporate Governance and Business Processes. Corporate Governance and Business Processes.
Westerman, W. C., Hotelling, S. P., Haggerty, M., Ording, B., Parivar, N., & Kerr, D. R. (2016). U.S. Patent No. 9,292,111. Washington, DC: U.S. Patent and Trademark Office.
Yoffie, D. B., & Baldwin, E. (2018). Apple Inc. in 2018.