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)

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.

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)

Fiscal 3Q 2020 Should Be Last Without My Detailed Guesses

At the current price of $369.77, AAPL is trading at a 24.1x multiple on my FY21 EPS estimate (23.1x when excluding FY21 net cash and dividends).

Once again I don't feel comfortable publishing my detailed guesses for last quarter's numbers and product revenue breakdown. Hopefully I'll be able to share these details for the next report, as I expect Apple to resume providing quarterly guidance next week.

On valuation, I've extended the projected multiple expansion, now going to 20x (was 18x) over the next 2-3 years. The significant increase in buybacks since 2018 is one of the most important (though seldom discussed) drivers of the valuation expansion. However, after the next couple of years the cash balance will reach within $50b of the stated goal of being "net cash neutral over time" which means the buyback pace will need to slow down a bit to remain sustainable, due to cash flows slightly restrained by potentially higher taxes and some additional tax liabilities coming due in 2023-26.

The only way to maintain the current buyback pace would be through significantly faster growth of cash from operations than I'm currently projecting for the next few years. Additionally, given the current stock price, buybacks can no longer achieve the same hugely impactful leverage effect as when the stock was significantly undervalued, often at half-priced discounts. So a multiple stabilizing around 20x for the foreseeable future seems appropriate for free cash flow growth slowing into the mid-single-digits after the next 2-3 years.

Here's just a few specific estimates I can share:

3mo ending Jun20  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   51.8     -  2.03
My estimates          -  38.7     - (4.34b shares)

Skipping Detailed Quarterly Estimates for Rest of FY 2020

In memory of Turley Muller. You got this one pal.

As of Friday's close of $277.97, AAPL is trading at a 18.0x multiple on my FY21 EPS estimate (16.9x when excluding FY21 net cash and dividends).

I have no way of figuring out the impact to global demand from various COVID-19 containment and mitigation policies in over 130 countries, neither today nor in a month when I would normally publish these estimates. In fact, I don't think even Apple itself can, so I'm not expecting them to provide guidance for next quarter.

I don't think Chinese manufacturing was significantly affected beyond a month or so, but the worldwide network of component supply dependencies and the demand uncertainty probably means Apple should be cautious in ramping production of existing and new products until most of the world has gone through this disruption. The flip side is a likely boost to Services revenue and possibly overall margins so long as HW product margins are not affected too much. Also, since demand is not destroyed but postponed, the rebound next year should be quite impressive, even spilling into 2022.

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.

Fiscal 4Q 2019 Final Estimates

As of Friday's close of $236.41, AAPL is trading at a 17.8x multiple on my next-twelve-months EPS estimate (16.2x when excluding NTM net cash and dividends).

After a brief panic early this year, market is back at previous-2-years-or-so trend of looking ahead a couple of years and pricing in expectations of mid-high single digit growth, mostly driven by more efficient balance sheet and narrative shift to services—even if new ones will take several years to bear fruit—and against loud noise from trade and threats of regulation. This has allowed for a valuation gradually inching up to broad market multiples for the first time in at least 12 years.

Given this gradually more positive (or rather less negative) sentiment I'm extending my valuation multiple expansion towards 15x (was aiming for 14x) forward-looking EPS plus net cash and dividends over the next 3-5 years. Currently at just 12.5x up from 10x 2.5 years ago, and one point per year expansion rate beginning to slow down after next year.

Attention to mainstream user needs is a great tactical move on this pre-5G cycle: photography, battery life, speed, and price will sell more iPhones. Free exclusive content is just a nice perk for now but eventually a strong strategic advantage if they have a hit or two.


Detailed estimates:

3mo ending Sep19  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   62.9     -  2.83
Apple guide low    61.0  37.5  2.66*
Apple guide high   64.0  38.5  2.96*
My estimates       63.8  38.3  2.93 (4.52b shares)

Fiscal 3Q 2019 Final Estimates

As of today's close of $204.50, AAPL is trading at a 15.5x multiple on my next-twelve-months EPS estimate (14.0x when excluding NTM net cash and dividends).

Don't get fooled by the most boring quarters, like, ever. Another consecutive "no collapse" quarter is good, means last Q1 adjustments worked. Not sure why WS sees 3% rev decline in Sep after flat or slight growth in June, in any case, strong Q4 guidance may surprise (but no earns growth until Q1).

Emphasis on intriguing longer-term themes is great. Key behind-the-scenes platform and business model shifts, happening almost in slow-motion, into new services and broader ecosystem relationships eventually will have huge effects on long-term fundamentals, but ironically will be hard to notice for some time and confound most pundits.

Also hard to explain, so I'll leave it at that.


Detailed estimates:

3mo ending Jun19  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   53.4     -  2.10
Apple guide low    52.5  37.0  2.00*
Apple guide high   54.5  38.0  2.21*
My estimates       53.8  37.8  2.15 (4.59b shares)

Fiscal 2Q 2019 Final Estimates

As of Friday's close of $203.86, AAPL is trading at a 15.5x multiple on my next-twelve-months EPS estimate (14.3x when excluding NTM net cash and dividends).


Highlights:

iPhone rev -15%/+2% annual growth in FY 19/20, low single digits thereafter.
Non-iPhone rev +16%/+10% annual growth in FY 19/20, high single digits thereafter.
Total rev -3%/+5% annual growth in FY 19/20, mid single digits thereafter.
Net income -9%/+7% annual growth in FY 19/20, mid single digits thereafter.
Quarterly dividend raised to 81/91 cents (+11%/+12%) in April 19/20.
Buybacks of $49b/$21b for FQ2/FQ3 ($63b authorized up to last Q).
$75b buyback authorization expansion, $80b buyback over 1y ending March 2020.
$65b buyback 1y ending March 2021, approximately $50b/y thereafter.

Detailed estimates:


3mo ending Mar19  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   57.4     -  2.36
Apple guide low    55.0  37.0  2.18*
Apple guide high   59.0  38.0  2.54*
My estimates       57.7  37.8  2.45 (4.62b shares)

Fiscal 1Q 2019 Final Estimates

As of yesterday's close of $150.00, AAPL is trading at a 11.6x multiple on my next-twelve-months EPS estimate (10.4x when excluding next-12-months net cash and dividends).


Projection highlights:

- iPhone revenue growth -10%/+3% in FY 19/20 (cf. -12% in FY16)
- Non-iPhone revenue growth +15%/+9% in FY 19/20
- Overall revenue growth -1%/5% in FY 19/20, mid-low single digits thereafter
- Net income growth -2%/4% in FY 19/20, low single digits thereafter
- Next report raises quarterly dividend to 81/92 cents in 19/20 (+11%/+14%)
- Buybacks of $8b/$60b for Q4/Q1 ($71b remained authorized as of Sep 2018)
- Expand authorization by $75b until March 2020, $65b until 2021, and ~$50b/y thereafter

Analysts are modeling insufficient buybacks, or don't believe in net cash zero promises from management, or still hope for big M/A. Implies ~8% upside to consensus EPS estimates.

My prior forward valuation multiple expansion of 0.25x per quarter will gradually taper starting after current quarter from 12x to 13.5x by 2022. Should be aiming at 15x but need to accomodate market sentiment in order to model future share reduction more accurately.


Detailed estimates:

3mo ending Dec18  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   84.3     -  4.19
Apple guid revis   84.0  38.0  4.16*
My estimates       84.1  38.0  4.17 (4.77b shares)

Fiscal 4Q 2018 Final Estimates [UPDATED 10/19]

[This was originally posted on 9/10. Please see 10/19 update details below. As of today's (10/19) market close of $219.31, AAPL is trading at a 15.0x multiple on my next-twelve-months EPS estimate (13.9x when excluding next-12-months net cash and dividend).]


Posting a month early and before Wednesday's event, as promised, in order to test my assumptions and intuition into this cycle, as I did last year as well with satisfying results.

The most uncertain item for me this time is iPhone pricing. I'm modeling a modest reduction from last year prices. Hope Apple can achieve this, as it would allow for a more sustainable boost to unit growth over mid single digits and easily beating the record 231.5m units sold in 2015.

The other sources of uncertainty are the Mac and iPad product lines. I'm assuming a significant update (finally) to both lines, announced and available for purchase this week. My Mac projections may be optimistic but the effect on total revenue and earnings of any mistake on my part will be limited.

I expect a strong Apple Watch Series 4 update, helping with continued very strong Other Products revenue growth.

Finally, I've slightly pared back my buyback intensity estimates, and accelerated the gradual valuation expansion mentioned last quarter from 0.1 to 0.25 quarterly increases in the EPS multiple, which now goes to 15x by 2022. Of course, this more realistic valuation reduces the number of shares Apple will be able to retire, resulting in a moderation of FY19 EPS growth from 30% to 23%. However, this is still well above Wall Street analysts, who continue to underestimate the effect of buybacks given their 15% EPS growth estimates when compared to their 5% revenue growth for next year (I'm at 6% revenue growth).


Detailed estimates:

3mo ending Sep18  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   61.2     -  2.76
Apple guide low    60.0  38.0  2.67*
Apple guide high   62.0  38.5  2.84*
My estimates       62.0  38.4  2.83 (4.83b shares)