Apple Inc. (AAPL) Could Generate $59 Billion of Free Cash Flow in 2018

RBC Capital's Amit Daryanani believes the big AAPL will give back a lot of sustained FCF generation to shareholders.

By the eyes of RBC Capital analyst Amit Daryanani, Apple Inc. (NASDAQ:AAPL) is an impressive free cash flow (FCF)-generating machine.

As Daryanani performs a “deep dive” into the tech titan’s FCF generation coupled with capital allocation, he sees only bright (and continued) prospects ahead.

Therefore, pounding the table, the analyst confidently reiterates an Outperform rating on AAPL stock with a $205 price target, which implies a 14% upside from current levels. (To watch Daryanani’s track record, click here)

When the company posts is second fiscal quarter results, the analyst looks for a “roadmap” from AAPL on its plan to give back the $163 billion of net cash to shareholders.

“We think AAPL’s solid FCF and $163B net cash balance will result in a meaningful step-up in capital allocation next quarter,” writes Daryanani, wagering: “We think investors often overlook AAPL’s ability to generate outsized amount of FCF consistently. We estimate AAPL could generate $59B of FCF in FY18 and, importantly, given its limited desire to do large M&A much of this (specially) post tax-reform could be returned back to shareholders.” Daryanani not only sees this $59 billion FCF estimate as achievable, but also “recurring.”

“While investors have been hyper fixated on the iPhone X cycle and its adoption trends, we think a key positive for AAPL is its resilient and recurring FCF generation (~$59B FCF, ~7% FCF yield),” adds the analyst.

In a nutshell, “We believe AAPL stock should continue to outperform the market driven by strong FCF generation, ability for outsized capital allocation and a growing iOS install base that generates sustained and recurring FCF growth,” Daryanani concludes.

TipRanks indicates a positive analyst consensus surveying the tech empire. Out of 28 analysts polled in the last 3 months, 15 are bullish on AAPL shares with 13 hedging their bets on the sidelines. With a return potential of nearly 7%, the stock’s consensus target price stands at $191.52.