Monday, October 25, 2021

Fiscal 4Q 2021 Final Estimates

As of Friday's close of $148.69, AAPL trades at a 23.2x multiple on my NTM EPS estimate (22.6x when excluding NTM net cash and dividends).

Market continues to ignore past scorching growth performance in fear of having seen demand pull-forward so subsequent stagnation or declines must be right around the corner. A slowdown from last year's growth is inevitable, but far from stagnation given the still incipient adoption of the latest drivers (5G, Apple Silicon, new Services) by the billion-plus user base.

Persistent industry-wide component shortages potentially stretching into next year suggests demand remains strong, but somehow still provides yet another "flawless flawgic" catch-22 for naysayers: either demand evaporates as people already got their tech fix, or will be strong but can't meet it due to shortages. This in tandem with the tired threat of regulation punishing any and all success, or the inane taper tantrums as if negative real rates provided an attractive incentive for traders hooked on growth, gives smart and patient investors a great opportunity (wait, no, not crypto).

Saturday, July 17, 2021

Fiscal 3Q 2021 Final Estimates

As of yesterday's close of $146.39, AAPL trades at a 25.1x multiple on my NTM EPS estimate (24.5x when excluding NTM net cash and dividends).

As the scorching growth period due to last year's covid closures-impacted compares and subsequent extraordinary shifts in technology needs starts subsiding over the current and next couple of quarters, and given the past several months to almost a year of the stock stagnating, the market is likely ready to reassess Apple's future growth expectations and assign a corresponding valuation multiple that reflects this growth potential.

I believe a long-term base case of 10% EPS growth is sustainable for at least 3-5 years after my mid-term 2-3y more brisk projection detailed below (which stands in contrast to most analysts turning skeptical on much growth or even expecting declines for the next couple of years or so), driven by mid-high single-digits revenue growth compounded with continued pace of buybacks around $100b per year (and likely increasing after 2026).

Confirmation of the sustainability of growth through new product announcements as well as already announced and visible roadmap resiliency (5G, Silicon, Services adoption) over the next year should easily justify a 25x multiple on forward-looking earnings, so the valuation projection shown at a 22x multiple still has room for upside revisions.

Detailed estimates:

3mo ending Jun21  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   72.9     -  1.00
My estimates       74.2  42.1  1.03 (16.78b shares)

Friday, April 23, 2021

Fiscal 2Q 2021 Final Estimates

As of yesterday's close of $131.94, AAPL trades at a 26.6x multiple on my NTM EPS estimate (25.8x when excluding NTM net cash and dividends).

For the annual update on the capital return program, I expect the quarterly dividend will go to 23¢ from 20.5¢ (+12.2%) and $135b added to the roughly $10b remaining by now in the share repurchase authorization ($32b remained by Dec) providing a comfortable cushion to sustain $85-95b annual pace of buybacks.

Last quarter's revenue/EPS growth of 34/64% is absolutely dumbfounding (and obviously not sustainable) for this size of a business, an outlier resulting from last year's impact on production (and demand to a lesser extent) from the pandemic closures. Mid-term (2-3y) revenue growth should decelerate to still remarkably strong low-teens thanks to WFH, homegrown silicon transition, and 5G adoption, leveraged through buybacks to achieve high-teens EPS growth. Longer-term (>3y) revenue growth of high single-digits combined with continued strong buyback pace yields sustainable double-digit EPS growth.

On valuation, I'm sticking with a 22x long-term multiple target for now (trailing lags at 16x but fast catching up by a point per quarter), at least until outlier results of this quarter (and perhaps FY) are behind us, as that's when we'll get better validation of the sustainable long-term growth potential that I'm currently projecting.

Detailed estimates:

3mo ending Mar21  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   77.1     -  0.98
My estimates       78.2  40.8  1.05 (16.92b shares)

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.

Sunday, October 25, 2020

Fiscal 4Q 2020 Final Estimates

As of Friday's close of $115.04, AAPL is trading at a 27.5x multiple on my FY21 EPS estimate (26.6x when excluding NTM net cash and dividends).

I expect record-strong Dec quarter guidance should offset any perceived weakness from roughly inline Sep results due to est. ~$6b iPhone and ~$1b AppleCare revenue push-back (as hinted in last call but perhaps not fully digested by analysts/investors). This offset gets picked up mostly in current 1Q but some also in 2Q ending in March due to late Oct/early Nov launch setting up an unusual 2Q as first full quarter of sales this cycle, a privilege normally reserved for the December quarter.

All product line projections revised upwards over NTM, particularly Mac and iPad which in turn feed back to boost mid/long-term growth for all other revenue segments thanks to my loopy modeling of installed base/ecosystem interdependencies. Modeling very strong NTM iPhone growth due to easy comps, with continued strength over next 2-3 years given 5G rollout spread over several cycles.

Beyond that it's anyone's guess but tentatively allowing for sustainable, long-term growth of high single-digits in revenue and low double-digits in EPS (was mid/high single digits). This boost would then generate enough cashflow to maintain recent ~$75b strong pace of buybacks even after "net cash neutral" goal is met in a few years, yet the higher projected stock price prevents a similar EPS leverage benefit as in recent years at half-price discounts.

As for valuation, such a level of growth if truly sustained long-term (5y) would likely justify further expansion beyond my admittedly conservative 20x multiple, but I've chosen not to bake this in just yet, at least until the more ambitious growth trajectory gets validated over the year or so after the exceptionally scorching March outlier is behind us.

Detailed estimates:

3mo ending Sep20  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   64.2     -  0.71
My estimates       64.8  37.9  0.73 (17.2b shares)