Warren Buffett Is Selling Apple Stock! | AAPL Stock Analysis |

Warren Buffett's burshire Hathaway has now sold nearly half of its stake in apple and when we take a look at their latest results that were released yesterday we can see at the end of December 2023 they held at a fair value around 174 billion worth of this company now in their latest results so June 2024 they hold around 84 billion so that is a massive drop as we said around 50% of those Apple shares have now been sold on top of that when we take a look at their cash they hold a record level amount of 277 billion so a few questions we want to ask why has he sold Apple stock and what is he planning to do with this massive amount of cash now as we've mentioned the S&P just on Friday had the worst drop since covid 2020 wiping around 3 trillion off the stock market so could potentially be looking to buy some undervalued companies does he believe that this crash will continue over the next few months or does he simply look at Apple as a company that trades at a very high valuation right now we see the forward PE at around 30.4 which is above the 5-year average of 26.7 so is there that possibility that maybe Warren Buffett sees this valuation as fairly stretched because when we do take a look at Apple's latest earnings that they reported last week their quarter results have only seen an increase of around 4.8% from the same quarter last year which as we just said for a forward P trading around that level it does seem to be fairly stretched and when you take a look at the last 9 months from June 24 against the same 9 months from last year the top line has only increased by around 0.8% Yes you heard that correctly 0.8% now for a company like apple you would think that with the valuation with the price that continues to climb that we would maybe see a lot more growth and what is interesting with this AI driven narrative with a lot of companies you would expect that Apple would be at the Forefront of that and while they've talked about releasing Apple intelligence some of the new features that they talk about in all honesty does seem very very underwhelming we have improved Siri which when we're being honest not many if any people that I personally know or have seen on social media use Siri at all we have some new summarization tools for emails and Keynotes and then we also have some genmo a lot of things which I would say in this age of AI we are expecting a lot of useful features a lot of these don't seem that great so a lot of things that we need to consider with this company moving forwards as we've already said it does trade at a fairly High valuation for a company which growth doesn't seem to be in that direction or that movement that we want to see so we want to understand in today's episode we'll do a quick analysis of this company get to own valuation and see whether or not we should also be considering selling or maybe actually it still looks undervalued and there is something that has been missed over the last 12 months then it is up around 14% over the last 10 years this is a company that is up 829 and has significantly outperformed the SNP when we take a look at the performance that does trade at the upper end of the 52e range we have a buy signal from Wall Street and they hold from both Seeking Alpha and Quant as we mentioned a very high valuation for the growth above 30 and in terms of a yield it does sit around. 5% and we can see alltime highs not too far along we have seen this in the more recent months sitting at $237 so let's look under the hood to the underlying metrics first thing that we want to point out dividend safety score 99 very safe the highest score obtained able and they did increase the dividend just a few months ago 4.2% pretty poor in my personal opinion that is keeping up in line with inflation of around 4% something we would expect to see at a much higher rate for this company and we can see what this effectively 99 rating means is that a dividend cut for apple looks extremely unlikely for those that do believe we're heading into a recession as we just saw a very large drop what we can see in the previous recession 0709 some comp comparative data well they didn't pay a dividend so nothing to compare however they had plus 14% recession sales well above the average of the S&P at -12 but they didn't have a too far off difference in terms of return 50% with the S&P during the same time 55 nothing too fancy with the dividend growth 4.2% as we said this year 7% on average over the last 5 years and high single digit over the last 10 at 9% and as we will find out when we look at the balance sheet they are sitting on a significant amount of cash they have also been increasing the dividend for the last 11 years now as we mentioned when we do take a look at this company not only do we compare the forward P against the 5year but also the dividend and ultimately dividen yield Theory tells us a company is undervalued when the current yield sits above the 5year average so this is a sign of overvaluation likewise when the forward p is above the 5e as we can see a double undervaluation signal in fact you can make that a triple given the information technology as a sector sits much lower at 23.4 now the yield is very trivial not something investors come to Apple for but as consistency on this channel we'll show you the free cash flow payout below 60% is what we want to see below 60% is what we get and in fact 15% in 23 13% over the next 12 months tells us that if they wanted to they could increase that dividend at a much rapid rate than what we are currently seeing now one thing we always like to note is the free cash flow and ultimately we want to see consistent increases over the longer term something we get with apple in fact more than three times over the last 10 years and expect it to continue over the next 12 months always a great sign we can see that trajectory is moving in the way that we want in terms of sales growth now this is one area that we just touched upon looking at the more recent quarter as well as the 9mon period what we want to see is 3 to 7% growth at a minimum Baseline in fact 3 to 4% is just telling us it's in increasing in line with inflation what we can see over the last 10 years three of them have been negative and unfortunately the more recent year at -3% and as we just saw looking at the more recent quarter we don't believe we're going to see a massive growth spur into 2024 in fact on a trading 12-month basis we are seeing 0% now numerically when we do look at the last 10 years we do see some very strong growth in fact more than doubled from 2014 to 2023 although just looking at the last three years we can see that growth start to stabilize now one thing we love about this company is that they do return a lot of excess cash through those shared Buybacks in fact over the last 10 years they've bought back nearly 10 billion worth of shares and that is fairly consistent something that we do see on a year-on-year basis so we do like to note that a bit of a bonus on top of the dividend but again very trivial in terms of the growth then roic very important metric 10% or more give us Faith management are able to effectively allocate their capital and one of the best results of any company is Apple's roic just over the last 3 years 55 to 65% 72 on a trading 12-month basis so that is a very positive sign when they do reinvest money into this company they do so at a very high rate as we can see here then when we take a look at the margins again very strong very healthy well above the minimums 12 that we want to see we'd like to see this increasing over the longer term we want to see that operating efficiency like we do when we look at the Topline Revenue because ultimately strong companies high quality companies they're able to increase both their top line as well as their margins something that we have seen Nvidia do so if you want a good example of those metrics do check out one of our Reviews free cash flow margin this is something that we like to see consistent year onye and it is well above the minimums in fact in the upper 20s over the last few years 27% on a trailing 12mth basis does make it incredible be attractive for potential investors we then look at the net debt to ebit DAR so the earnings before the interest tax depreciation ammortization what this tells us is one the dividend safety two the balance sheet strength and ultimately the numbers that you see below number of years it would take the company to pay off all of their Deb net of cash on hand 0.44 in 2023 .25 anticipated over the next 12 months so this company has an incredibly strong balance sheet as we about to see and a ton of cash which is one of the reasons why we did say say we would have expected a larger increase to the dividend as opposed to one that is just in line with the inflationary rate now one thing we also do within our analysis is look at both Insider and institutional movement starting off with Insider ownership well 0.006% over the last 12 months we've seen 183 Million worth of sales however in terms of buying we haven't seen any and when we take a look at the more recent quarter we see no movement going back though to Quarter Two we see 61 Million worth of sales in 24 and quarter 1 we see around 18 million now when we take a look to see who these insiders are in fact one thing that we do want to point out for full transparency even though we do discuss Insider sales we don't really believe it has much of an impact on investment thesis as insiders will sell for many reasons whether it's personal or financial ideally we want to see inside of buying which we do believe to be very bullish so as we mentioned 30th of May was the more recent sale by the director 75,000 shares of around4 .4 million but it is something we do like to show you just for that transparency and then we take a look at the institutional ownership just above 60% around 57 billion worth of sales over the last year with a lot more in fact nearly double the amount of buying during the same time period when we take a look at quarter 2 we also notice that same theme double the amount of buyers and sells however in quarter 1 we see a lot more selling than buying going back one more quarter we see the complete opposite so in summary into institutions they are buying more than they are selling as we can see in the more recent quarter insiders though it is the opposite a lot of selling but as always regardless insiders institutions buys or sells do your own due diligence and never rely on any of their movements so now let's take a look at the income statement now we did touch upon the Topline Revenue as we did say nice growth over the last 10 years in fact double During the period but we did point out the last three years it does look to be slowing down and one thing that we want to talk about as well is the bottom line net income what story can be told there and while we look at it from a graphical perspective it has increased over the long term a lot more inconsistent and in fact the last three years mirroring the Topline Revenue looking fairly flat minimal growth when we zoom out though we can see nearly three times growth over the last 10 years but again over the last three years 95 billion in 21 99.8 in 22 97 in 2023 so something just to factor into the analysis it does doesn't mean that Apple isn't a company to have the portfolio it just means that you need to be considering buying this if it's one you want to consider at a reasonable valuation that does reflect the growth that it does currently have then we want to take a look at the health of the company their total cash and short-term Investments versus total debth going from around 25 billion as we can see in 2014 to around 62 in the latest quarter so it has increased more than double a little bit inconsistent but over the wider period we do notice the growth always remember though any number that we look at in isolation doesn't tell us anything so when we do compare it to their total debt numerically and directionally we can see 35 billion in 2014 to around 101 billion in the latest quarter so that is massive growth of their total debt a lot higher than their total cash one thing that we can say though from the highs of 2021 it has started to reduce so it went from around 124 billion in September 23 to sitting around 101 now it does still look secure as we saw on the net debt to ebit D it is well below in fact one so that is a positive sign but just something to keep an eye hopefully it does continue to come down and they do have right now a respectable amount of cash and short-term investment now before we move on we just want to let you know we have released our latest weekly article if you want access to this or any others you can grab a copy by clicking on the pin comment below and we have also released our 35 undervalued stocks to consider in August you can go through each one we talk about the value that we believe the upside as well and also those that we are currently holding within our own portfolio next thing we want to discuss is the earnings now we always like to look at how they've performed against expectations and moving forwards projections four out of four so over the last four quarters they have beaten on the EPS always a great sign 100% gives us faith when looking forwards that they will be able to hit these estimates and we do note for the next four quarters they are anticipating High single digit to low double digit grow growth if they do ultimately hit the September 2025 EPS estimate the forward P will come down still pretty high at around 29.62 and again still above that 5year average we then want to just run through some underlining metrics as well as the gradings the first one is an F now ultimately what this means whilst we like to point out the p on a non-gaap basis moving forwards we can see that whichever valuation metric you use this company is trading at a massive premium to the sector Medan in fact just on the P alone with the sector median around 23 if you are buying Apple at this price you are paying a 44.25 premium now as always sometimes it is Justified it is warranted and we can also incorporate a margin of safety into our valuation shortly as well unfortunately though on the growth it doesn't look that great they get a degrade year on-ear 0.43% as we said we want to see much larger numbers for a company that is essentially Valu at above 30 on a 4ward p basis sector median is higher even though it is low single digit still 3.6% pretty much in line with inflation whereas apples is lower on a forward looking basis 2.04% again pretty poor sector median is also higher at 6.72 and when we look to the earnings per share over the next 3 to 5 years apple is anticipating 11% growth where the sector is 14.4 so a very reasonable question to ask is why exactly would you be paying for a company like apple when we can see the growth metrics look very poor in relation to the sector and they trade ated premium well one of the aspects that Apple do very well as we're about to see is the profitability they get an A+ now when we look at the gross profit margin it does sit a little bit lower 46% against the sector median of 49.2 but their bottom line is fantastic 26% with the sector Medi at 3.22 and then couple that with their cash from operations 113 billion as opposed to the sector median of 100.2 million so lot of things to incorporate into your analysis we get one buy rating from Wall Street a double hold from the other analyst an F on valuation a d on growth with an A+ on profitability now we also want to understand how well or how poorly have they performed against others in the sector now for some comparisons we have Dell Technologies and we have a few others that are very well known and what we can see ultimately this is a company that is up 15% and that is one of the worst performing from the comparatives over the last year and including dividends reinvested over the last 5 years we can see it is one of the best performing although it is overshadowed by smci around 3600% and over the last 10 years again very respectable performance 944 per but as always whether you think this is good enough for your portfolio or not based on the historical data past performance is never an indicator of future performance now before we jump in this is the final thing that we just want to mention when you do invest in a company always think to yourself will it outform the S&P over the longer term over your essential investment Horizon if not low cost ETFs may be the way to go especially if you're struggling to have that confidence in a particular company so over the last year we do see that Apple has marginally underperformed the S&P 15% versus 18% when we expand this over the last 5 years we see the opposite significant outperformance of Apple at 347 and over the last 10 years again we can see that Apple has been an incredibly strong company but always ask yourself do you believe this happening again over the next 10 years now we're going to jump into the valuation model as always if you do enjoy the content value is being provided smash that like button hit that subscribe and Bell button so you are continually notified of these videos as they drop and our intrinsic value today comes at $27 now how we got to this value we effectively put it through the DCF model where we have the free cash flow year- on-ear we have the average growth rate over the last 10 years at 10% and forward looking we have gone for that 10% in our model using our discount rate we got the present value of future free cash flows and terminal value add together with the cash subtract total debt get to equ Value divide by the shares outstanding and we get that intrinsic value which shows us overvaluation and based on this here we have downside of 6% now a lot of people will say that is way too conservative you see AI really helping Apple in the future so you want to go a bit higher at around 12 12% if you believe that is way too conservative we can see here that by using 12% you would get upside of around 8% and if you use 14% if you wanted to be even more optimistic you would get upside around 24% with a value of $273 as always you can grab a copy of this model by clicking on the pin comment below and running in your own numbers whether it's for apple or any other company on your watch list or in your portfolio so let's take this through to the intrinsic value calculation and as it's just the one model today at $27 with the current price at $220 we believe right now that apple is trading above its fair value now that doesn't necessarily mean you should sell it but what we're seeing here right now that if you wanted a margin of safety you would have to wait for much lower as always on this channel we use a 10% MOS and we execute on this if it meets our three golden criteria a wide Mo strong financial metrics and good forward-looking data if you believe this today well it is a Buy around $186 so you would have to wait before triggering on that price a lot of people will say you know it is a high quality company and they're happy to wait for just a 5 MOS well that'll be around $196 and again there will be others in the crowd who are happy to buy it at its fair value and that's it as we said around $27 ultimately though Wall Street are in complete disagreement they have a price target of $247 over the next year they do believe this is a buy as we saw in the rating and they have upside of 12 % as always though do let us know your thoughts in the comments below is this one that actually you do believe has a lot more upside you are looking to buy maybe it's on the watch list maybe you own it and you just want to hold it for the time being or maybe actually this is one like Warren Buffett you are considering selling as always if you enjoy today's episode smash that like button hit that subscribe and Bell button so you are continually notified of these videos as they drop don't forget to click on the pin comment below where you can sign up to the free Weekly Newsletter and also if you want to join us in the patreon where we do discuss our weekly buys and sells as always let us know your thoughts in the comments Below have a great day and we'll see you all on the next one