Apple’s Robust FCF Propels Stock Growth Prospects

Apple Stock

Apple Inc. (NASDAQ:AAPL) has delivered impressive results for its fiscal Q1 ending Dec. 31, 2023, unveiling a remarkable 24% year-over-year increase in its free cash flow (FCF). This surge, coupled with a 7.3% rise in the trailing 12 months (TTM) compared to the previous quarter, positions AAPL stock for a potential 15% surge to $214 per share, based on its robust FCF performance.

In the latest quarter, Apple’s operating cash flow reached $39.895 billion, resulting in an FCF of $37.5 billion after deducting $2.392 billion in capital expenditures. This marked a significant improvement, showcasing a 24% YoY increase from the $34 billion FCF in the prior year’s fiscal Q1.

Analyzing Apple’s FCF in the TTM period provides valuable insights, revealing a 7.3% growth from $99.6 billion in the last fiscal quarter to $106.9 billion. Notably, Apple’s FCF margins continue to ascend, reaching 27.7% in the current quarter, up from 26.1% in the previous quarter. This upward trend is attributed to the expanding share of high-margin services in Apple’s sales, with services revenue rising to $23.1 billion in fiscal Q1.

Conservatively projecting a further increase in FCF margins to 28.0% over the next year, analysts anticipate that Apple’s FCF could amount to $112 billion. This estimate is based on applying the FCF margin to forward sales projections, with analysts foreseeing 2024 sales reaching $388.75 billion.

Setting target price estimates, a 3.5% FCF yield could result in a market cap of $3,200 billion, representing an 11.5% increase from the current market cap of $2.87 trillion. Even with a 3.25% yield, AAPL stock could reach a market cap of $3.45 trillion, implying a 20% rise from the present valuation.

Several analysts echo optimism about Apple’s future stock performance, with an average price target exceeding $200 per share. Considering the potential for a higher valuation based on FCF metrics, it’s plausible that AAPL stock could witness a 15% increase, reaching $213.73 per share.

In conclusion, Apple investors can find confidence in the company’s robust free cash flow, paving the way for a promising 8-15% surge in stock price over the coming year. This positive outlook aligns with the sentiments of various analysts who foresee Apple’s continued growth and value potential.

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