Friday, March 13, 2020

Skipping Detailed Quarterly Estimates for Rest of FY 2020


In memory of Turley Muller. You got this one pal.

As of Friday's close of $277.97, AAPL is trading at a 18.0x multiple on my FY21 EPS estimate (16.9x when excluding FY21 net cash and dividends).

I have no way of figuring out the impact to global demand from various COVID-19 containment and mitigation policies in over 130 countries, neither today nor in a month when I would normally publish these estimates. In fact, I don't think even Apple itself can, so I'm not expecting them to provide guidance for next quarter.

I don't think Chinese manufacturing was significantly affected beyond a month or so, but the worldwide network of component supply dependencies and the demand uncertainty probably means Apple should be cautious in ramping production of existing and new products until most of the world has gone through this disruption. The flip side is a likely boost to Services revenue and possibly overall margins so long as HW product margins are not affected too much. Also, since demand is not destroyed but postponed, the rebound next year should be quite impressive, even spilling into 2022.

Tuesday, January 21, 2020

Fiscal 1Q 2020 Final Estimates


As of Friday's close of $318.73, AAPL is trading at a 22.0x multiple on my next-twelve-months EPS estimate (20.5x when excluding NTM net cash and dividends).

What's a fair multiple? I've dealt with this question several times before, so not going to dwell too much on justifying this move. I just wrote 6 long paragraphs on how P/E multiples are convenient but unreliable, a popular but widely misunderstood oversimplification of proper valuation theory, how multiples do relate to DCF modeling, its pitfalls (both PE and DCF), how I've tracked their empirical usefulness over the years, and on and on piling it with thick layers of much dull and dubious import. So I deleted all that (you're welcome).

My model's trailing multiple is up to 12x by now, and revised to aim for 18x over next 2-3 years (was going for 15x over 3-5y). So it goes higher faster. This remains relatively conservative (and likely rises too slow compared to market swiftness in rerating AAPL) given broad market forward multiples still higher: S&P 500 at 18.7, Tech 22, Cons. Staples 20, Cons. Disc. 22.3 (but beware all these are multi-decade highs). And peer mega tera cap tech still much higher.

Saturday, October 19, 2019

Fiscal 4Q 2019 Final Estimates


As of Friday's close of $236.41, AAPL is trading at a 17.8x multiple on my next-twelve-months EPS estimate (16.2x when excluding NTM net cash and dividends).

After a brief panic early this year, market is back at previous-2-years-or-so trend of looking ahead a couple of years and pricing in expectations of mid-high single digit growth, mostly driven by more efficient balance sheet and narrative shift to services—even if new ones will take several years to bear fruit—and against loud noise from trade and threats of regulation. This has allowed for a valuation gradually inching up to broad market multiples for the first time in at least 12 years.

Given this gradually more positive (or rather less negative) sentiment I'm extending my valuation multiple expansion towards 15x (was aiming for 14x) forward-looking EPS plus net cash and dividends over the next 3-5 years. Currently at just 12.5x up from 10x 2.5 years ago, and one point per year expansion rate beginning to slow down after next year.

Attention to mainstream user needs is a great tactical move on this pre-5G cycle: photography, battery life, speed, and price will sell more iPhones. Free exclusive content is just a nice perk for now but eventually a strong strategic advantage if they have a hit or two.


Detailed estimates:


3mo ending Sep19  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   62.9     -  2.83
Apple guide low    61.0  37.5  2.66*
Apple guide high   64.0  38.5  2.96*
My estimates       63.8  38.3  2.93 (4.52b shares)

Tuesday, July 16, 2019

Fiscal 3Q 2019 Final Estimates


As of today's close of $204.50, AAPL is trading at a 15.5x multiple on my next-twelve-months EPS estimate (14.0x when excluding NTM net cash and dividends).

Don't get fooled by the most boring quarters, like, ever. Another consecutive "no collapse" quarter is good, means last Q1 adjustments worked. Not sure why WS sees 3% rev decline in Sep after flat or slight growth in June, in any case, strong Q4 guidance may surprise (but no earns growth until Q1).

Emphasis on intriguing longer-term themes is great. Key behind-the-scenes platform and business model shifts, happening almost in slow-motion, into new services and broader ecosystem relationships eventually will have huge effects on long-term fundamentals, but ironically will be hard to notice for some time and confound most pundits.

Also hard to explain, so I'll leave it at that.


Detailed estimates:


3mo ending Jun19  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   53.4     -  2.10
Apple guide low    52.5  37.0  2.00*
Apple guide high   54.5  38.0  2.21*
My estimates       53.8  37.8  2.15 (4.59b shares)

Monday, April 22, 2019

Fiscal 2Q 2019 Final Estimates


As of Friday's close of $203.86, AAPL is trading at a 15.5x multiple on my next-twelve-months EPS estimate (14.3x when excluding NTM net cash and dividends).


Highlights:

iPhone rev -15%/+2% annual growth in FY 19/20, low single digits thereafter.
Non-iPhone rev +16%/+10% annual growth in FY 19/20, high single digits thereafter.
Total rev -3%/+5% annual growth in FY 19/20, mid single digits thereafter.
Net income -9%/+7% annual growth in FY 19/20, mid single digits thereafter.
Quarterly dividend raised to 81/91 cents (+11%/+12%) in April 19/20.
Buybacks of $49b/$21b for FQ2/FQ3 ($63b authorized up to last Q).
$75b buyback authorization expansion, $80b buyback over 1y ending March 2020.
$65b buyback 1y ending March 2021, approximately $50b/y thereafter.


Detailed estimates:


3mo ending Mar19  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   57.4     -  2.36
Apple guide low    55.0  37.0  2.18*
Apple guide high   59.0  38.0  2.54*
My estimates       57.7  37.8  2.45 (4.62b shares)