Thursday, January 21, 2021

Fiscal 1Q 2021 Final Estimates


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 %


1 comment:

Anonymous said...


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."