Although many pundits and analysts agree that Apple (NASDAQ:AAPL) is in the midst of transforming from an underdog, growth-oriented computer company into a mature blue chip technology powerhouse, many commentators still disagree on Apple’s long-term prospects. Case in point is analyst Michael Hodel of Morningstar investment research firm.
Hodel maintains that Apple deserved its less than perfect credit rating. Apple received an Aa1 senior unsecured rating from Moody’s and a similar AA+ rating from S&P. These are the second-best credit ratings awarded by these ratings services. However, Morningstar gave Apple an AA- rating, which is even lower than Moody’s and S&P’s ratings.
Via Morningstar’s website, Hodel explains his thinking behind this lower credit rating: “We’ve only awarded Apple a narrow-moat versus, say, Oracle (NASDAQ:ORCL) or IBM (NYSE:IBM) or Microsoft (NASDAQ:MSFT), which we have wide-moat ratings on. And it’s really that competitive advantage that we see at companies like Oracle and Microsoft versus Apple that’s caused us to shade our Apple credit rating down a little bit.”
In other words, despite Apple’s enormous cash reserves and established ecosystem of products, Hodel still does not believe that the Cupertino-based tech giant offers the kind of stability that is found in Microsoft and other tech companies. Microsoft is an interesting example of this so-called stability since it has seen its main PC software market steadily shrink over the past year.
One major reason that Hodel believes that Oracle, Microsoft, and IBM offer more stability for investors is because those companies have “services and products that they sell to enterprise customers who depend on those software packages or those hardware products day-in and day-out to run their businesses.”
Apple has maintained its success by continually appealing to consumers with well-designed products that offer an unparalleled user experience. However, consumers’ tastes are also notoriously fickle when it comes to tech products. Since businesses are generally slower in adopting new technologies than individual consumers, Apple is seen as a less stable company overall.