Sunday, July 8, 2012

Fiscal 3Q 2012 Final Estimates

As of Friday's closing price of $605.88, AAPL is trading at a 8.9 multiple on my forward EPS estimate (7.0x ex-cash). For guidance and forward-looking valuation I'm assuming an iPhone launch in September (which paradoxically is the conservative view for the long term). This implies about 6m units shifted into this fiscal year instead of next, and affects the replacement cycle timing well into 2014. Still, I'm including estimates for the October launch scenario below so you can pick your own.

Detailed estimates below:

3mo ending Jun-2012   Rev($M)   EPS($)
-------------------   -------   ------
Apple guidance         34,000     8.68
Analysts consensus     37,370    10.34
Deagol estimates       40,641    12.16

3mo ending Sep-2012   Rev($M)   EPS($)
-------------------   -------   ------
        (iPhone launch in Sep)
Deagol estimates       47,500    14.03
Apple guide (est.)     40,000     9.80

        (iPhone launch in Oct)
Deagol estimates       43,540    12.34
Apple guide (est.)     37,000     8.65

Analysts consensus     37,050     9.86

12m ending Sep-2013   Rev($M)   EPS($)
-------------------   -------   ------
        (iPhone launch in Sep)
Deagol estimates      239,870    72.93

        (iPhone launch in Oct)
Deagol estimates      244,525    74.93

Analysts consensus    196,200    54.21

Valuation (12mo ending on)   EPS($)  Y/Y  10x  Cash  Div   Tot
--------------------------   ------  ---  ---  ----  ---  ----
Trailing        (Jun-2012)    45.39  80%  454   129    -   582

        (iPhone launch in Sep)
Fair value      (Jun-2013)    67.93  50%  679   182   11   872
1yr target      (Jun-2014)    88.26  30%  883   248   15  1145

        (iPhone launch in Oct)
Fair value      (Jun-2013)    68.31  51%  683   182   11   877
1yr target      (Jun-2014)    94.45  38%  945   254   15  1214

Revenue breakdown ($M):
Mac        6,210 ( 4,834 × $1,285)
iPod         989 ( 6,500 × $152)
iPhone    19,550 (31,000 × $631)
iPad      10,365 (18,500 × $560)
iTunes     2,047
Periph       678
Software     802

Income statement ($M):
Revenue   40,641
COGS      22,126
GM        18,515
OpEx       3,346
OpInc     15,168
OI&E         171
Pre-tax   15,340
Tax        3,835
NetInc    11,505
Shrs.        946
EPS       $12.16

GM%        45.6%
OpInc%     37.3%
Tax%       25.0%
NetInc%    28.3%


mbeauch said...

Daniel, you have me really scratching my head on the 3 month ending and 12 month ending, one does not seem to correlate with the other? Could be just me not understanding you thought going forward. Great analysis as usual.

Daniel Tello said...

Mark, could you please elaborate a bit more on what's bugging you? Thanks, and sorry if I made it confusing.

Red Oak said...

Thank you Daniel. I love your posts, especially the deep categories dive you did. That was awesome stuff.

It looks like you took your projections up a bit from your post from last quarter

I think the replacement timing is going to be the key data point to zero in over the next few quarters. I know you assume 2 years for iPad and iPhone. I think there is a reasonable possibility of it extending to 2.5 or even 3.0 years over time, based on my own anecdotal observations. Especially for the iPad which has no subsidy incentive

That said, as I look at the market with a five year horizon, I continued to be optimistic at the size of the opportunities and how small Apple's share is. Even with PCs - huge upside for Apple if they can figure out how to get to 20% unit share

Any thoughts on a longer term view of Apple, say 3 to 5 years? Assuming Apple can continue to execute in a similar fashion and there is no big, disruptive change (I know, a very big if), where do you see it going?


Mile Olivera said...

I'm puzzled by including the possibility of a Sept '12 iPhone launch as everything I've been reading seems to point to October.

Anonymous said...

Thank you for the impressive work.

I have one question though. I believe the new iPad will only be available start July 27th in China, could Apple guide as high as 9.8 without a late September launch of the next iPhone?

Daniel Tello said...

Red Oak, I shared a lot of my longest term thoughts in the Limit to Growth series, especially part 3.

Unknown, in the past Apple has tended to launch near the end of a quarter. I have no privileged information suggesting either month, but it does make the transition less painful, at least from a modeling and financial consistency point of view since it avoids the bumpy trending difficulties seen last year.

Anon, as shown in the guidance table my estimated "sandbagged" EPS assuming an October launch is $8.65 ($12.34 without sandbagging). This is based on 22m iPads sold. I doubt they can achieve near 30m iPads even with the help of mainland China to allow them to guide up to $9.80.

Anonymous said...

Thank you for the response, much appreciated.

KirkBurgess said...

Im a little confused by your Sep 2013 full year target.

Your Sep 2013 target assuming a Sep 2012 iphone launch is lower than your Oct 2012 iphone launch Sep 2013 target.

If the next iPhone 2012 model launches in Sep this year, then I would think your Sep 2013 estimate would also assume a Sep launch in 2013 for the iPhone 2013 model?

mbeauch said...

Daniel, It just seems odd that the (3 mo) and (12 mo) don't align the same. You have the rev going up for the Sept launch (3 mo), wouldn't this carry forward to the 12 month?

Daniel Tello said...

"Your Sep 2013 target assuming a Sep 2012 iphone launch is lower than your Oct 2012 iphone launch Sep 2013 target."

Yes, Sep launch shifts roughly 6m units from 1Q2013 to 4Q2012.

"You have the rev going up for the Sept launch (3 mo), wouldn't this carry forward to the 12 month?"

No. The 12-month (ending in Sep2013) doesn't include the period that's getting the increase (4Q2012), but it does include the period getting taken from (1Q2013).

Oak said...

Daniel, thanks for your work. Am I reading this correctly that you are projecting a share price between 1145-1214 in June 2013? (Or are you projecting it in June 2014?) The former seems to be the case, but the latter makes more sense to me.

Daniel Tello said...

I consider the "trailing" metric relevant for the past 3 to next 3 months. If the EPS projections come through, I'd see the "fair value" metric as relevant for roughly the next 3 to 9 months, and the "1yr target" metric relevant for roughly the next 12-18 months. Of course this is all my own subjective/empirical sense.

JavaJack said...

Thanks, Daniel. I always enjoy reading your analysis. I'm feeling like Apple's move to drop eco-certification for future products could have a bigger impact than they think. I'm betting there will be a reversal of this decision. Also, Apple seriously needs more stores open in China. The impostor stores are having a very negative, even if unfair, impact on the Apple product line.

Anonymous said...

aren't your june'13 cash assumptions a bit conservative (about 13b/q increase)?. If earnings increase from 45 to 68 (about 50%), current cash is about 14b/Q, and dividends starting now should account for about 2.5 b/q, cashflow wouldn't leave a higher number than those 13b/Q of your estimates?

Great work! Thanks a lot.

Daniel Tello said...

Yes I'm assuming cash flow directly from earnings even though it's historically higher for Apple. Also deduct about $3b for buybacks. So the $68 EPS times 948 shares is $64.4b, less $10.7b for divs and $3b for buybacks leaves $50.7b to cash, divided into 948 shares results in $53 increase in cash per share.

selva11 said...

Rumor sites are reporting Aug 7 as iPhone 5 launch date. How do u think this would affect your numbers? I guess not too many will be buying the 4s now.