Apple is the well-known maker of the iPhone, iPad, and Mac PCs, wearables, and other products and services generated through its own ecosystem. The company dominates the smartphone industry, garnering roughly 80% of industry profits versus less than 20% of units. The iconic iPhone accounts for 52% of company revenue and a likely higher percentage of operating profit. Services account for roughly 20%, with a mix of other hardware at 30%.
Apple has grown into a major US debt issuer since its first large debt raise in 2013 to fund share repurchases. In late 2021, Moody’s upgraded Apple’s rating to Aaa, joining tech peer Microsoft at this highest rating level. We expect Apple’s strategy of transitioning to a net cash neutral position to occur gradually over the next three to five years. This refers to Apple’s financial policy of growing its debt outstanding and reducing cash & marketable securities to levels that are about equal for both. As of 30 September, Apple had USD 162bn of total cash, cash equivalents and marketable securities on its balance sheet versus total debt of USD 111bn.
The credit outlook for Apple is positive and offers income seeking investors quasi risk-free opportunity. While operational excellence is above average, the major risks include new competition in the smartphone market where the company was lacking to deploy any major new innovation.