My very first Apple estimate

A few weeks ago I stumbled into the old The Motley Fool board for AAPL, and was surprised to see them open without subscription. My recollection from about 10 years ago was that they had gone to a paid subscription model, and thus I had abandoned them for good and never looked back in these 10 years (nothing against the Gardner bros. investment style but wasn't a fan of their constant spamming for their newsletters).

So it seems at some point in the last 10 years they decided to go with a freemium model. Anyway, as I was reading some of the posts, I think I recognized some of the old nicks from way back then. I got curious and decided to search for my old posts. Couldn't find them on a first try, but then I tried an alternate nick I used and there I was, in full 10-years-younger and slightly snarky-er glory, trying to be all witty and all that. (Ah, the old interwebs... hasn't changed one bit from the usenet days, it seems. Or rather, people haven't changed.)

So, here's my very first post ever on an AAPL board, and to my surprise (seriously), it's an EPS estimate:

Fiscal 2Q 2011 Final Estimates

I was planning on posting my estimates next week once the quarter had ended. However, because the last few times I posted estimates AAPL was priced closer to the next-3-months low than its next-3-months high price, and seeing as right now we're barely above the most recent low, I didn't want to let this opportunity go by.

In the last 3 estimate posts, I included a P/E blurb highlighting how extremely undervalued was the then current AAPL price. Here they are, for reference:

Jun30: Apple now trading at [$251.53] 12.1 times my FY2011 EPS (9.8x after excluding cash)
Oct02: Apple now trading at [$282.52] 12.7 times my FY2011 EPS (10.5x after excluding cash)
Dec23: Apple now trading at [$323.60] 12.9 times my fwd EPS estimate (10.5x after excluding cash)

It seemed to me that those 12-13x multiples (10x ex-cash) on my estimates were acting as a rock-bottom level for AAPL. No more. As of Friday's close, AAPL is now trading at [$330.67] 10.5 times my fwd EPS estimate (8.3x ex-cash). As I type this it's up to $336 in pre-market, which is merely inline with the Q's move.

Pro analysts: mediocrity has become a habit

Horace Dediu is just amazing. He's so much more fun to read than all my dreary number-filled tables. Go read his "existential theory" of asymco. A true "entertainer," indeed.

Smooth Operator

No need to ask.
He's a smooth operator

"That's a part of the magic at Apple, and I don't want anybody copying it."

"Excellence has become a habit."

"If this is cannibalization it feels pretty good."

I'm happy and relieved to see Apple finally beating my estimates after I had been slightly overshooting for the last couple of quarters.

Thanks to Steve, Tim and the rest of the Team, all Apple employees, for kicking major ass. To paraphrase a commenter in another post: me and my family and our accounts thank you, Apple.

Anyway, on to the details. Solid quarter with upside across the board, except Macs and iTunes coming a bit below my estimates. The $670m revenue upside and 50 bps GM beat was tempered by slightly higher than expected operating expenses and tax rate, resulting in a 21 cent "surprise" (3.2%).

But the real shock of the report is not that much on the December quarter but in Q2 ending in March, which looks to be another record in the making (ironically Q2 is usually the weakest of the year). Not only did they guide higher than the admittedly lowball WS analysts expectations, PO also shattered my own "sandbagged" estimate, and almost guided up into my "real" estimate of $5.07. That would have been, and is unprecedented.

All the details:

Fiscal 1Q 2011 Final Estimates

Apple now trading at 12.9 times my fwd EPS estimate (10.5x after excluding cash)

I might adjust things a bit if there's any announcement in January.

3mo ending Dec-2010   Rev($M)   EPS($)
-------------------   -------   ------
Apple guidance         23,000     4.80
Analysts consensus     24,110     5.29
Deagol estimates       26,071     6.23