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)

Fiscal 2Q 2022 Final Estimates

As of today's current price of $161.57, AAPL trades at a 23.0x multiple on my NTM EPS estimate (22.4x when excluding NTM net cash and dividends).

The main question for investors is to what extent do the various current global issues (war, pandemic, new lockdowns, supply chain issues, rising cost of capital, inflation, recession, consumers subscription fatigue, regulation, labor activism... did I miss any?) translate into a longer-term headwind on growth beyond the current year or so. It's anyone's guess, so I'll just share my impressions without much justification (you should research those issues and derive your own conclusions). I do not see a long-term effect on demand, but I do believe management must be asking themselves a big, structural question around manufacturing diversification involving a relatively modest but potentially longer-term impact on current cost structures.

This question is far from exclusive to Apple, impacting the whole electronics industry (and cars, toys, apparel, among many others). The good thing is Apple uniquely has a hefty gross margin cushion from a rising Services mix which allows it to execute almost any product manufacturing transition they may decide to take on with minimal impact on overall profitability. That doesn't mean it would be an easy decision to make, nor easy to execute. It's possible they've already set sail on this course. In any case, don't expect any visibly drastic changes in financial performance, nor dramatic measures or decisions announced. It's a long journey, and the destination isn't necessarily 180 degrees from the current situation. So I've modeled around 1% headwind on the long-term (beyond the next 3-5y) growth projection now at high single-digits, and a bit larger short-term impact over the next quarter or two. I'll leave it at that.

This is the time Apple always updates their Capital Return Program. A brief review of what it's done so far: $484 billion spent to retire 11.4 billion shares at an average cost of $42.59 per share, so almost quadrupled that investment. I expect at least another $25b spent during last quarter, leaving about $15b authorized for buybacks. So, given current $80b in net cash and projected near $110b in FCF over NTM, I think the authorization should be extended by over $120b more until next year, and the quarterly dividend raised by 13.6% to 25 cents per share from the current 22 cents. However, I wouldn't be surprised if management feels no need to be as aggressive (so as not to tip their hand so much) and instead decide on $100b extra for buybacks and 24 cents for the dividend (+9%).

As I promised last time, I'm bumping the long-term valuation multiple to 24x, and plan to take it to 25x for the December quarter preview at the earliest, depending on financial results through the rest of the Fiscal Year, and what's announced in the Summer and Fall events.

Detailed estimates:

3mo ending Mar22  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   94.0     -  1.43
My estimates       96.8  43.5  1.51 (16.42b shares)

Fiscal 1Q 2022 Final Estimates

As of today's current price of $156.05, AAPL trades at a 23.4x multiple on my NTM EPS estimate (22.7x when excluding NTM net cash and dividends).

Consensus growth estimates for FY22 have improved slightly, but still remain well below my estimates. I'm at +11/15% while consensus is 4.5/2.4% rev/EPS growth for the Fiscal Year. The fact that consensus EPS growth is slower than revenue growth proves those are flawed estimates not reflecting the significant leverage from rising gross margins and about 3% lower share count.

Given the market's recent nervousness as well as last report's inline results, I've decided to leave the long-term target valuation multiple at 23x for now. If my March quarter estimates align with whatever guidance clues are provided, then I most likely will raise the multiple to 24x next time, with still one more nudge to 25x hopefully later this year. I'll leave the discussion of potentially huge upside from new product categories to other analysts, but the effect on financials will be gradual over the next 3-5 years, and not felt this year at all. However, investors should anticipate such effects and most likely bring back the trailing multiple up above 30x with the stock breaking $200 well ahead of any announcement.

Detailed estimates:

3mo ending Dec21  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens  118.4     -  1.89
My estimates      121.3  42.2  1.98 (16.54b shares)

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).

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)

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)