Apple on Tuesday received a debt-rating upgrade from Moody’s to Aaa, the firm’s highest possible rating.
Moody’s said the upgrade of Apple (ticker: AAPL) to Aaa from Aa1 reflects exceptional liquidity, earnings growth, and a very strong business profile. The company’s push to reach a net cash neutral position over time, the ratings company said, further supports expectations for “an exceptionally strong liquidity profile over the next 3 to 5 years.”
Apple stock closed higher 1.9% at $172.99 on Tuesday.
“Apple has substantial financial flexibility to manage its business risks, including growing regulatory uncertainties, make investments in new growth opportunities, and balance shareholder returns,” Moody’s said. It thinks the company can generate annual free cash flow of $80 billion to $90 billion over the next 12 to 24 months.
“Apple’s $173 billion of unrestricted cash balances and free cash flow result in an unmatched liquidity profile with substantial financial flexibility,” Moody’s said.
The ratings firm said that Apple’s primary risks relate to regulatory uncertainties, in particular in the company’s service segment. “The Aaa rating incorporates Moody’s view of Apple’s world class risk management capabilities, robust financial flexibility, and diversifying offerings, which should allow the company to preserve or strengthen its financial profile over the medium term despite these challenges,” Moody’s said.
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