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.

In light of this unique situation, for the first time in two decades I will not be able to share detailed estimates for Q2 or Q3 guidance, but will stick with projections for FY21 and beyond, at least until we hear more from Apple. For the valuation model I'm holding the trailing numbers roughly flat until Dec, which is probably not far from what might actually happen.

My estimates for the capital return program update due in April include a dividend raise of 7 cents (+9%) to 84 cents quarterly and ~$63b additional authorization for buybacks (to ~$105b when combined with estimated ~$42b still unused by the end of this quarter).

Some detailed estimates:

3mo ending Mar20  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   60.4     -  2.68
Apple guide low    63.0† 38.0  2.77*
Apple guide high   67.0† 39.0  3.17*
My estimates          -  38.8     - (4.39b shares)

†Revenue guidance rescinded on 17 February
*Implied EPS guidance range from other figures provided
 by Apple and my diluted shares outstanding estimate

3mo ending Jun20  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   58.1     -  2.52
My estimates          -  39.3     - (4.34b shares)

12m ending Sep21  Rev$B   $EPS
----------------  -----  -----
Analysts consens  308.6  15.61
My estimates      306.0  15.43

Timeframe  NTMfrom   $EPS  Y/Y  Mult  Val  $*   Div  Tot
---------  -------  -----  ---  ----  ---  --  ----  ---
Trail Val  Apr2019  12.62   6%  12.5  158  20  3.08  181
 Fair Val  Apr2020  13.69   9%  15.8  217  15  3.36  236
1y Target  Apr2021  16.51  21%  17.6  291  14  3.68  308
2y Value!  Apr2022  18.49  12%  17.9  332  12  4.00  348

*Cash per share balance net of debt and commercial paper

(click to enlarge)


Philip Elmer-DeWitt said...

The Apple Earnings Smackdown will miss you!

Daniel Tello said...

Thanks Phil! Not going anywhere, but yes, I'll also miss playing, even if this time feels more like rolling dice.