Companies with strong cash-generating abilities boast a highly flexible nature, as they’re better equipped to weather a potential economic downturn, can capitalize on growth opportunities, and provide investors with a sense of safety.
After all, cash is king.
And when it comes to stacking cash, mega-cap tech players – Microsoft MSFT, Alphabet GOOGL, and Apple AAPL – fit the criteria nicely. All three stocks have helped lead the market’s rebound in 2023, delivering outsized gains. Let’s take a closer look at each.
Apple
Investor-favorite Apple has rebounded in a big way in 2023, with shares up more than 40% and finding momentum following its latest quarterly results. Regarding the release, Apple exceeded the Zacks Consensus EPS Estimate by 5% and posted revenue modestly ahead of expectations.
The company generated roughly $19.4 billion in free cash flow throughout its latest period.
Image Source: Zacks Investment Research
It’s worth noting that the company’s Services revenue has been a source of growth for Apple over the recent years, though the iPhone still represents a sizable chunk of total sales overall. The company posted Services revenue of $22.3 billion in its latest release, up nicely from the year-ago period and well above the Zacks Consensus Estimate.
Apple has consistently exceeded Services revenue expectations as of late, as we can see below.
Image Source: Zacks Investment Research
Microsoft
Microsoft shares have benefited from the AI frenzy in 2023, up more than 50%. Analysts have taken their earnings expectations higher for the mega-cap giant nearly across all timeframes, helping land it into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
The company generated roughly $20.7 billion in free cash flow throughout its latest quarter, up 22% compared to the same period last year. As we can see below, MSFT’s cash-generating abilities have rebounded nicely from 2022 lows.
Image Source: Zacks Investment Research
In addition, Microsoft is forecasted to continue growing its top and bottom line steadily, with estimates for its current year suggesting 13% earnings growth on 14% higher sales. And peeking ahead to FY25, estimates allude to a further 14% bump in earnings on 13% revenue growth.
Alphabet
Alphabet has also enjoyed positive price action amid the broader tech turnaround in 2023, with shares up nearly 50%. Analysts have been particularly bullish for its current fiscal year, with the $5.74 Zacks Consensus EPS Estimate up 13% over the last year.
Image Source: Zacks Investment Research
The Google parent posted quarterly free cash flow of $22.6 billion in its latest quarter, climbing 40% from the same period last year. As we can see below, the company’s cash-generating abilities have remained consistent post-pandemic.
Image Source: Zacks Investment Research
Shares presently trade at a 23.0X forward earnings multiple (F1), below the 24.2X five-year median and five-year highs of 39.1X. The stock presently sports a Style Score of “D” for Value.
Bottom Line
Companies boasting strong cash-generating abilities can be great investments, as they have plenty of cash to fuel growth, pay dividends, and easily wipe out debt.
And as mentioned above, these companies are better equipped to handle an economic downturn, which is undeniably a positive.
For those seeking cash-generators, all three above – Microsoft MSFT, Apple AAPL, and Alphabet GOOGL – fit the criteria.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
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