Monday, January 23, 2017

Fiscal 1Q 2017 Final Estimates

As of today's market close of $120.08, AAPL is trading at a 12.5x multiple on my next-twelve-months EPS estimate (8.9x when excluding next-12m net cash and div).

Not trying to guess the timing and details of whatever foreign cash repatriation deal gets done, or what lower corporate tax rate might apply going forward. Nor am I modeling any "protectionism" effects until more definitive developments occur. Unpredictable policy changes should affect everyone, not just Apple, but of course it is Apple that gets singled out and most mentioned in the media. So, to counter that sentiment I'm doing nothing at all to my model until we hear more, especially from Apple management as new administration "official" announcements seem unreliable.

Sell side analysts revenue estimates for the rest of FY17 and FY18 right now seem slightly optimistic for a change, but likely I'm just being a bit conservative. On the other hand I believe they're slightly low on margins. Feels odd to be so close to consensus for the next year or two but as always I have no problem adjusting if actual reports come higher. In any case, valuation remains quite attractive, of course.

Detailed estimates:

3mo ending Dec-2016  Rev($M)  GM(%)  EPS($)
-------------------  -------  -----  ------
Analysts consensus    77,370      -   3.22
Apple guide low       76,000   38.0   3.09*
Apple guide high      78,000   38.5   3.27*
My estimates          78,050   38.7   3.28 (5.33b shares)

3mo ending Mar-2017  Rev($M)  GM(%)   EPS($)
-------------------  -------  -----   ------
Analysts consensus    54,180      -    2.11
Apple guide low (e)   52,000   38.5    1.97*
Apple guide high(e)   54,000   39.5    2.14*
My estimates          53,833   39.5    2.15 (5.25b shares)

*EPS guidance ranges derived from other figures provided
 by Apple and diluted shares outstanding estimated by me

12m ending Sep-2017  Rev($M)  EPS($)
-------------------  -------  ------
Analysts consensus   227,760   8.95
My estimates         228,650   9.12

Valuation (fwd-12mo from)  EPS($)   Y/Y  10x  Cash*  Div  Tot
-------------------------  ------  ----  ---  ----  ----  ---
Trailing       (Jan-2016)    8.27  -12%   83    29  2.23  114
Fair value     (Jan-2017)    9.59   16%   96    32  2.40  130
1yr target     (Jan-2018)   10.32    8%  103    38  2.50  144

* Cash per share balance net of long-term debt

(click to enlarge)
F1Q17 Revenue breakdown:
iPhone    53,355 (77.50 × $688)
iPad       6,681 (14.50 × $461)
Mac        6,666 ( 5.25 × $1,270)
Services   6,794
Other      4,554 ( 6.00 × $364 = 2,181 Watch)

Income statement:
Revenue   78,050
COGS     (47,844)
GM        30,206  38.7%

OpEx     ( 6,972)
OpInc     23,234  29.8%

OIE          396
Pre-tax   23,630

Tax      ( 6,144) 26.0%
NetInc    17,486  22.4%

Shares     5,330
EPS        $3.28

(amounts in millions except $ASP, $EPS, and ratios%)


indigoprint said...

These are great. Thanks! - Roger

Anonymous said...

Nice job on earnings estimate!

Anonymous said...

Given that AAPL is now trading above fair market value and only about 5% below your 1 year target, are you still long Apple and if so, why?

Daniel Tello said...

Hi Anon, I'm still long but I wouldn't recommend adding to positions at this price. The valuation in this post applies to last quarter, and for the current quarter (updated after the report) I have fair value at 135 and target at 148. You can see the chart in the pinned tweet in my twitter feed (@dtellom). So even though the average price this quarter will remain well below FV, your point still stands and you can consider my position as neutral for prices between 135 and 148.

Also, this is not investment advice, just a reflection of my position tuned to my own very personal risk profile. You shouldn't rely on anything from my model for investing decisions, much less trading strategies. I could be wrong, in my estimates or the "fair" multiple I believe the market will allow for AAPL. Understand that my projections can be way off, as they've been several times in the past. Just be very careful out there.