Moody’s Investors Service on Tuesday raised its credit rating on Apple Inc. (NASDAQ: AAPL) to Aaa, the company’s senior rating for Apple debt. This means that Apple will receive the lowest possible interest rate on any future borrowing.
In its rating change announcement, Moody’s noted, “Apple’s very strong business profile reflects its substantial scale of operation, a large installed base of products and users of its services, strong customer loyalty and a high-end brand positioning which stimulates its profitability at the forefront of the sector. in all product categories. Analyst Raj Joshi said:
Apple’s rating upgrade to Aaa reflects the company’s exceptional liquidity, strong earnings which we believe will continue to grow over the next 2-3 years, and its very strong business profile. Apple’s ecosystem of products and services provides increased visibility of revenue over time despite some level of volatility inherent in its business from product introduction cycles.
And it’s all about money:
Moody’s expects that a mix shift towards higher value 5G smartphones and sustained growth in higher margin services will support strong profitability and annual free cash flow of $ 80 billion to $ 90 billion (more of 50% of Moody’s total adjusted debt) over the next 12 to 24 months. Apple’s $ 173 billion in unallocated cash balances and free cash flow translates into an unmatched liquidity profile with substantial financial flexibility.
All this does not mean that there is no headwind. Loup Funds analyst Gene Munster, a longtime Apple Bull, wrote on Wednesday morning that 10 Apple products his company has tracked over the past four weekends in six countries indicate supplies remain tight. In fact, Munster believes Apple’s estimate of $ 8 billion in revenue is too low and that sales for the December quarter will be $ 10 billion lower.
The good news is that Apple will recoup two-thirds of this shortfall in the March quarter, and delays for some products have been reduced. New iPad models have the longest delivery time, 42 days, while the Apple Watch has the shortest delivery time, one day. New iPhone 13 models have an average delivery time of two days, down from four days last week and eight days three weeks ago.
The U.S. Transportation Security Administration (TSA) plans to start accepting mobile driver’s licenses (called mDLs in the industry) stored in a person’s Apple wallet at two U.S. airports starting in February. According to the Secure Technology Alliance, “TSA is preparing to begin its gradual rollout, with the integration of mDL Apple Wallet being its first step, which will allow certain security checkpoints at participating airports to be the first places where people can use their mDL in the Wallet app. . “
Last September, Nia Impact Capital, an investor in Apple, filed a shareholder proposal to put Apple on the agenda for the company’s next shareholders meeting. The proposal would have required the company to assess the potential risks to the company of non-disclosure agreements (NDAs) and other policies that obscure company decisions. Apple responded by asking the Securities and Exchange Commission to allow it to exclude the proposal from the meeting’s agenda because the company had already “substantially implemented the proposal.” On Tuesday, the SEC rejected Apple’s request, saying the company had in fact not done so.