APPLE STOCK

Final estimates for the first quarter of 2016


Since closing the market on Friday at $ 97.13, the AAPL has traded 9.1x more times according to my EPS estimate for the next twelve months (6.0x if I exclude the next 12 million net cash and giant).

Last quarter, $ 19 billion in net revenue speaks volumes (details below). Looking ahead, I am revising my next estimate of 12-18 months from $ 164 to $ 157 due to reduced estimated revenue and EPS (FG16 / 17 by approximately 4/5%) mostly on the iPhone (now a single-digit unit is sold – through growth ).

Promising guidelines: Contrary to some recent sales reports, I believe iPhone channel stocks were still at the lower end of the demand range for 5-7 weeks or so by the end of September. Another week of filling the canal (representing 3-4m units deployed through 1H16) would be appropriate, and even adding 6-7m would not violate the 7 week upper limit. This would support flat sales (any additional demand, for example, from new 4-inch factors rumored to require even higher levels), allow for slight growth in deliveries, and secure the best until the current quarter (F2Q16), which are recently reduced estimates on the sales side.

I expect management to act opportunistically in the share buyback during the current quarter, likely depleting the remaining $ 30 billion already approved in the program before the end of the fiscal year and demanding that the expansion be announced in April. However, after fiscal year 16, I do not model more than what is needed to reimburse employee grants (mainly due to concerns / ignorance about comfortable long-term debt levels and foreign tax / political uncertainty regarding repatriation), which also implies further potential for EPS beyond framework of the estimated strong guidance for the current quarter if a significant permit is announced in April.

Detailed estimates:

3mo ending Dec-2015  Rev($M)  GM(%)  EPS($)
-------------------  -------  -----  ------
Analysts consensus    76,760          3.24
Apple guide low       75,500   39.0   3.09*
Apple guide high      77,500   40.0   3.31*
Deagol estimates      78,464   40.4   3.39 (5.60b shares)
3mo ending Mar-2016  Rev($M)  GM(%)   EPS($)
-------------------  -------  -----   ------
Analysts consensus    56,700           2.28
Apple guide low (e)   58,000   39.0    2.25*
Apple guide high(e)   60,000   40.0    2.45*
Deagol estimates      60,751   40.5    2.52 (5.52b shares)

*EPS guidance ranges derived from other figures provided
 by Apple and diluted shares outstanding estimated by me


12m ending Sep-2016  Rev($M)  EPS($)
-------------------  -------  ------
Analysts consensus   238,570   9.58
Deagol estimates     248,245  10.33


Valuation (fwd-12mo from)  EPS($)  Y/Y  10x  Cash*  Div  Tot
-------------------------  ------  ---  ---  ----  ----  ---
Trailing       (Jan-2015)    9.52  28%   95    27  2.03  124
Fair value     (Jan-2016)   10.68  12%  107    31  2.26  140
1yr target     (Jan-2017)   11.61   9%  116    38  2.56  157

* Cash/share balance net of long-term debt

(click to enlarge)

F1Q16 Revenue breakdown:
iPhone    51,311 (78.0 × $658)
iPad       8,463 (19.0 × $445)
Mac        7,079 (5.75 × $1,231)
Services   5,407
Other      6,204 (6.50 × $519 = 3,375 Watch)

Income statement:
Revenue   78,464
COGS      46,794
GM        31,671  40.4%
OpEx       6,333
OpInc     25,337  32.3%
OI&E         399
Pre-tax   25,737
Tax        6,743  26.2%
NetInc    18,994  24.2%
Shares     5,602
EPS($)      3.39

(units, shares, and $ in millions except $ASP, EPS, and ratios)



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Naveen Kumar

Friendly communicator. Music maven. Explorer. Pop culture trailblazer. Social media practitioner.

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