Fiscal 4Q 2023 Final Estimates

As of Friday's closing price of $168.22, AAPL trades at a 23.8x multiple on my NTM EPS estimate (23.4x when excluding NTM net cash and dividends).

First of all, sorry for missing last quarter. I had some issues adapting in time to a new version of Excel, still getting used to somewhat annoying new quirks. I should've planned it a couple months before crunch time, my bad.

Hopefully estimates are about done getting revised down. It wasn't like just a weak quarter or two but more gradual, with the impact mostly felt cumulatively over the last two years. As an illustrative reference point, a year ago I was expecting Rev/EPS for this FY of $431.4b/$7.12, which now ended up at $385.6b/$6.11 (-11%/-14%), and FY24 projected EPS of $7.61 now down to $7.06 (-7%) might still be slightly optimistic. But I feel the downward revisions are getting smaller (see vertical revision arrows in chart detail below).

Nonetheless, the mid/long-term projection has been more resilient, holding up at mid/high single-digits growth in Rev/EPS, in essence the only change being it stalled for the last couple of years, as the expected post-pandemic growth slowdown turned out more like a pause.

Product-wise, need a strong lineup for Mac and iPad to overcome this post-pandemic dip. We'll see what tonight's event offers for Mac, but must revitalize iPad in the spring to justify my return to growth next year. Don't expect any discernible impact from Vision Pro for the next 2-3 years. Margins look incredible, driven by continued mix shift into Services.

Detailed estimates:

3mo ending Sep23  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   89.3     -  1.39
My estimates       91.9  44.5  1.45 (15.68b shares)

Fiscal 2Q 2023 Final Estimates

As of today's opening price of $164.89, AAPL trades at a 23.2x multiple on my NTM EPS estimate (22.6x when excluding NTM net cash and dividends).

Capital return program update (my expectations):
$90-100b added to buyback authorization
$41.7b remained as of Dec and about $17-20b as of April
Quarterly dividend raised 13% to 26 cents

Detailed estimates:

3mo ending Mar23  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   93.0     -  1.43
My estimates       96.1  44.8  1.54 (15.87b shares)

Fiscal 1Q 2023 Final Estimates

As of today's most recent price of $142.50, AAPL trades at a 20.3x multiple on my NTM EPS estimate (19.8x when excluding NTM net cash and dividends).

Kept the long-term (beyond FY24) growth rate for revenue at mid single-digits and EPS back to high single-digits helped by strong margins and buybacks leverage. Some investors have been wondering whether the buyback authorization might stop once the "net cash zero" goal gets reached (we're practically there already at $49b cash net of debt when compared to the market cap near 50x that figure). This concern is just silly. Apple will generate over $90b in free cash flow (excludes capex) this year and that will continue to grow with earnings. Regressing back into the black hole of hoarding it is out of the question, and returning it all through dividends would require an immediate 6x increase on the current level this year, which is ridiculous. However, I do expect a slight pick up in the dividend raise pace to double-digit growth from the mid-high single digits growth of the last several years.

In the short term, last quarter appears to me a temporary plateau in growth, mostly due to one-time manufacturing stoppages and slowing Services growth. However, Services should continue to grow faster than company-wide growth, surpassing 20% share of revenues this year and reaching $100b by 2024. Overall, I expect high single digit/strong double-digit growth in revenues/EPS for the remaining 3 quarters of the Fiscal Year.

Analysts have shifted from a weak first half of 2023 to now expecting a flat or declining full year and even continued weakness into next year, but I think they've overdone it given Apple's historical resiliency during weak economic cycles. In addition, the market valuation has already been reset during last year to reflect more uncertain economic conditions for the next year or two, and this too shall pass, so I'm holding the 24x long-term multiple steady.

Detailed estimates:

3mo ending Dec22  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens  121.2     -  1.94
My estimates      123.6  43.4  2.06 (16.01b shares)

Fiscal 4Q 2022 Final Estimates

As of today's closing price of $142.41, AAPL trades at a 20.0x multiple on my NTM EPS estimate (19.5x when excluding NTM net cash and dividends).

Lowered the long-term (beyond FY23) revenue growth rate by another point or so, now at mid single-digits, yielding mid-high single-digits in long-term EPS growth. New revenue streams won't move the needle for the next 2y and will provide very low visibility of the growth potential even after 3-5y, though the stock price should begin to reflect whatever investors dream up of such long-term potential as soon as we get any announcement, and likely even earlier.

In the short term, I trimmed 4Q22/FY23 revenue and EPS by $2/4b and 7/5¢ respectively, mostly due to FX. During uncertain times ahead Apple could easily decide to emphasize cash conservation but instead I'm going with a more deliberately opportunistic approach, given the attractive share price, by modeling at least $80b of the $86b remaining buyback authorization over the three quarters ending 2Q23 (totaling over $100b for the year and keeping it there for the next 3 years), as well as a dividend increase for next year comparable to the one done in 2018 (+16%) rather than the single-digits raise seen in the last 3 years. I doubt the 14-week Q1 has been considered much in consensus estimates. This represents 4-8% upside and perhaps explains some/most of my divergence for Q1.

Detailed estimates:

3mo ending Sep22  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   88.9     -  1.27
My estimates       90.1  42.5  1.35 (16.14b shares)

Fiscal 3Q 2022 Final Estimates

As of Friday's closing price of $154.09, AAPL trades at a 21.9x multiple on my NTM EPS estimate (21.3x when excluding NTM net cash and dividends).

Trimmed revenue projection by 2-3%, partially offset by slightly more patient opex intensity, still results in long-term EPS growth trajectory holding up at high single-digits, so the 24x projected valuation remains valid, even conservative. The recent market price dip to low-20s multiple offers the now rare opportunity of an average quarterly price below my "fair" (or forward) valuation level (thus the blue dashed line in the chart below), something which used to be the case at all times from late 2008 to early 2017 but has only happened once (Jan-Feb 2019) in the last 5 years. Even after a 20% rebound from recent lows, this still seems an exceptional opportunity for long-term investors. As always, I could be wrong, so do your own due diligence and decide according to your particular risk-tolerance profile.

Detailed estimates:

3mo ending Jun22  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   82.6     -  1.16
My estimates       83.9  43.4  1.22 (16.31b shares)