Apple ‘s (AAPL) new 10-year deal with Major League Soccer, announced Tuesday and starting in 2023 , speaks to the power of a strong balance sheet and robust cash generation during these tumultuous times and to one of the 15 things Jim Cramer took away from his week in Silicon Valley — the belief that Apple, which started slowly on streaming, will surpass all other services over time. A strong balance sheet is absolutely crucial to riding out market volatility as a positive cash position —more cash and equivalents than debt — means that if business slows for a period of time, the company does not have to worry about defaulting on loans. A very strong balance sheet, like the one Apple has — and other Club names such as Google-parent Alphabet (GOOGL), Facebook-patent Meta Platforms (META), and Microsoft (MSFT) also have — allows for continued growth-oriented investments despite a turn in macroeconomic conditions. Of course, the other factor is cash flow as the uncertainty on timing of an economic downturn means that we don’t want to see a company blow through their cash horde and be left with a weak balance sheet. Fortunately, Apple’s cash flow is also very robust, often exceeding even the company’s net income – meaning there’s more cash flowing through the business than profits even after accounting for capital expenditures. While a strong balance sheet and cash flows are always important, they are even more so when the economy slows because if a company can’t generate funds for investment internally, then there are really only two other ways to go about it: raise debt or sell equity. However, given the rise in interest rates, the former is more expensive than it was just six months ago as lenders demand greater reward for the increased risk of lending right now, while the latter means more dilution as more shares have to be sold to raise the same amount of cash thanks to plunging share prices. Fortunately, Apple doesn’t have to do either. Its strong balance sheet, robust cash flows, and possibly the strongest ecosystem in the world, allow the tech giant to control its own destiny. Remember, as we have said several times already, this is not the time to make money, it’s the time to not lose it — and investing in companies that are in control of their own destiny and able to internally fund investments is how you achieve that goal. Jumping back to the MLS deal, we remind members that Apple already has an agreement with Major League Baseball , which offers “Friday Night Baseball” games for free on Apple TV+ without a subscription, for now. The soccer arrangement will be different. Apple will create a new, paid MLS streaming service , available exclusively through the Apple TV app. Some of the games will be available to Apple TV+ subscribers at no additional cost and some matches will be free. How ever, you slice it. These two deals bring America’s past time and (baseball) and the most popular sport in the world (soccer/football) onto Apple’s growing streaming platform. While we do think the company is on its way to becoming a dominant streaming platform — a notion reinforced by what Cramer heard last week from tech power players in the San Francisco area — perhaps the greatest advantage Apple has in streaming is that it really doesn’t need to be the widest spanning platform out there. We say that because unlike much of the competition, streaming isn’t the core of Apple’s business. It’s not even at the core of Apple’s Services segment. That means that rather than needing a service that can compete with the likes of Netflix , all Apple TV+ really needs to be is another piece of a broader services package that helps incentivize customers that have one or more services to upgrade to the Apple One bundle , which includes all six: Apple Music, Apple TV+, Apple Arcade, iCloud+, Apple News+, and Apple Fitness+. Every time Apple can add another incremental service or bolster an existing one, it strengthens the value proposition of the bundle. Therefore, it increases the stickiness of the ecosystem and further locking in existing customers. Note, a similar dynamic can be said for Amazon Prime where it’s not so much about any singular aspect of the business but rather the value proposition of a Prime membership overall. Like Apple, Amazon is also an Investing Club holding. So, we love the deal Apple announced Tuesday with MLS — and while it alone is not a reason to buy the stock, we believe it speaks to a company that’s in control of its own destiny and is the perfect representation of the type of haven investors can confidently stay in to ride out the storm currently underway in the financial markets. (Jim Cramer’s Charitable Trust is long AAPL GOOGL, META, MSFT and AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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Source: Business - cnbc.com
