Tuesday, January 21, 2020

Fiscal 1Q 2020 Final Estimates

As of Friday's close of $318.73, AAPL is trading at a 22.0x multiple on my next-twelve-months EPS estimate (20.5x when excluding NTM net cash and dividends).

What's a fair multiple? I've dealt with this question several times before, so not going to dwell too much on justifying this move. I just wrote 6 long paragraphs on how P/E multiples are convenient but unreliable, a popular but widely misunderstood oversimplification of proper valuation theory, how multiples do relate to DCF modeling, its pitfalls (both PE and DCF), how I've tracked their empirical usefulness over the years, and on and on piling it with thick layers of much dull and dubious import. So I deleted all that (you're welcome).

My model's trailing multiple is up to 12x by now, and revised to aim for 18x over next 2-3 years (was going for 15x over 3-5y). So it goes higher faster. This remains relatively conservative (and likely rises too slow compared to market swiftness in rerating AAPL) given broad market forward multiples still higher: S&P 500 at 18.7, Tech 22, Cons. Staples 20, Cons. Disc. 22.3 (but beware all these are multi-decade highs). And peer mega tera cap tech still much higher.