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)