As of today's close of $136.87, AAPL is trading at a 30.2x multiple on my NTM EPS estimate (29.4x when excluding NTM net cash and dividends).
I've extended the model projection a few more years into the future, and what came out is rather remarkable, though not surprising: a new virtuous cycle of self-reinforcing growth has ensued for Apple. Starting NTM due to easy iPhone comps and resilient "work/learn from home" trends, followed over next 2-3 years by 5G and Apple Silicon adoption, further compounding even longer term into all lines due to ecosystem synergies (my so called "loopy" modeling). And all that is even before considering potentially huge initiatives in new devices such as tags and glasses, or new services tackling transportation and health.
Bear in mind I could be wrong, overly optimistic about iPhone in particular, which if instead stagnates or keeps declining from here, as it has the last 5y amid declining smartphone and PC markets (yet there was a pandemic last year and tariff wars the prior two), it would likely throw a wrench in the cycle's gears. However, I sense the next 5 years won't be as tough as the last. Granted there might be increased regulation, government intervention, and higher taxes, but I think none of it will amount to much in the end. So, on with my rosy picture.
By the end of the 5y projection in calendar 2025 I get $486b in revenue (from $288b in C2020) and $108b in net income (from $60b in C2020), and sustained ~7/8% annual growth respectively looking further forward. All that profit creates yet another feedback loop for the stock as it all must be returned to shareholders (totaling $1 trillion by end of C2025 in buybacks and dividends combined since program started in 2012) if the stated goal of becoming net cash neutral is met and maintained, resulting in EPS more than doubling to $8 and the share price breaking $200 with steady ~11/12% annual growth respectively from there.
I believe this is a conservative projection, but still take it as a very rough guide, say allowing +/- 2-year window given the uncertainties of projecting that far into the future on tech's extremely dynamic waves, not to mention fickle broad market gyrations in sentiment sure to come at some point.
Speaking of market sentiment, I caved and nudged the projected long-term multiple to 22x from 20x, despite saying last time I'd rather wait until the exceptional growth this quarter (FQ2 EPS up 47%!) and year had passed. I just feel the market won't be so patient with that scorch already baked into consensus numbers. And I still left some room to bump it more when we actually get to see these results. So there, enough said.
Detailed estimates:
3mo ending Dec20 Rev$B GM% $EPS ---------------- ----- ---- ---- Analysts consens 102.6 - 1.40 My estimates 104.9 38.2 1.45 (17.1b shares) 3mo ending Mar21 Rev$B GM% $EPS ---------------- ----- ---- ---- Analysts consens 73.9 - 0.90 Apple gde lo (e) 72.0 38.5 0.85* Apple gde hi (e) 75.0 39.5 0.94* My estimates 74.5 39.5 0.94 (16.9b shares) *EPS guidance ranges derived from other figures provided by Apple and diluted shares outstanding estimated by me 12m ending Sep21 Rev$B $EPS ---------------- ----- ---- Analysts consens 317.5 4.01 My estimates 330.1 4.27 Valuation Timeframe NTMfrom $EPS Y/Y Mult Val $* Div Tot --------- ------- ---- --- ---- --- --- ---- --- Trail Val Jan2020 3.47 10% 15.0 52 4.5 0.81 57 Frwrd Val Jan2021 4.53 30% 18.8 85 3.0 0.90 89 1y Target Jan2022 5.19 15% 20.9 109 2.1 0.98 112 2y Value! Jan2023 5.77 11% 21.7 125 1.3 1.09 128 *Cash per share balance net of debt and commercial paper
(click to enlarge)
F1Q21 Statements of Operations Revenues F1Q21e F1Q20 Y/Y% -------- ------ ------ ----- iPhone 60,861 55,957 +8.8 Mac 9,563 7,160 +33.6 iPad 7,387 5,977 +23.6 W/H/A 11,820 10,010 +18.1 -------- ------ ------ ----- Products 89,631 79,104 +13.3 Services 15,229 12,715 +19.8 -------- ------ ------ ----- Tot Revs 104,859 91,819 +14.2 Gross Margin Breakdown -------- ------ ------ ----- Products 29,920 27,029 +10.7 Services 10,164 8,188 +24.1 -------- ------ ------ ----- Tot GM 40,085 35,217 +13.8 -------- ------ ------ ----- Prod GM% 33.4% 34.2% -0.8 Svcs GM% 66.7% 64.4% +2.4 -------- ------ ------ ----- Tot GM% 38.2% 38.4% -0.1 Op Expns 10,759 9,648 +11.5 -------- ------ ------ ----- OpIncome 29,325 25,569 +14.7 Op Mrgn% 28.0% 27.8% +0.1 OIE 68 349 -80.5 -------- ------ ------ ----- Pre-Tax 29,394 25,918 +13.4 Tax Rate 15.5% 14.2% +1.3 Tax Prov 4,556 3,682 +23.7 -------- ------ ------ ----- Net Incm 24,838 22,236 +11.7 Net Mrg% 23.7% 24.2% -0.5 Dil Shrs 17,078 17,818 -4.2 -------- ------ ------ ----- EPS $1.45 $1.25 +16.5 Amounts in millions except EPS in dollars and ratios in %
Posts
1 comment:
Thanks. I've read your post for years, always sensing that you don't get caught up in the short-term sentiment or momentum. So this is really interesting and exciting to hear!
"... a new virtuous cycle of self-reinforcing growth has ensued for Apple. Starting NTM due to easy iPhone comps and resilient "work/learn from home" trends, followed over next 2-3 years by 5G and Apple Silicon adoption, further compounding even longer term into all lines due to ecosystem synergies (my so called "loopy" modeling)" and..." I sense the next 5 years won't be as tough as the last."
Post a Comment