APPLE STOCK

Final estimates of fiscal 4Q 2019


Since Friday’s close of $ 236.41, the AAPL has been trading at 17.8x multiple times in my EPS estimate for the next twelve months (16.2x if I exclude NTM net cash and dividends).

After a brief panic earlier this year, the market has returned to a two- or three-year-old trend looking forward for several years and setting prices in anticipation of medium-high single-digit growth, largely driven by a more efficient balance sheet and narrative transition to services – even if new ones need a few years to bear fruit – both against the loud noise of trade and the threat of regulation. This allowed the valuation to gradually approach broad market multipliers, for the first time in at least 12 years.

Given this gradually more positive (or rather less negative) mood, I am expanding my estimate by multiplying to 15x (aimed at 14x) advanced EPS plus net cash and dividends over the next 3-5 years. Currently at just 12.5x compared to 10x 2.5 years ago, and the spread rate of one point a year is starting to slow down after next year.

Paying attention to the needs of mainstream users is a great tactical move in this pre-5G cycle: photography, battery life, speed and price will sell more iPhones. Free exclusive content is just a nice convenience for now, but in the end 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)


3mo ending Dec19  Rev$B   GM%  $EPS
----------------  -----  ----  ----
Analysts consens   87.3     -  4.44
Apple gde lo (e)   85.0  37.5  4.26*
Apple gde hi (e)   89.0  38.0  4.61*
My estimates       87.6  37.9  4.50 (4.45b shares)

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


12m ending Sep20  Rev$B   $EPS
----------------  -----  -----
Analysts consens  271.0  12.76
My estimates      274.3  13.31


Valuation
Timeframe  NTMfrom   $EPS  Y/Y   Mult  Val  $*   Div  Tot
---------  -------  -----  ---  -----  ---  --  ----  ---
Trail Val  Oct2018  11.76  -1%  11.50  135  21  3.00  159
 Fair Val  Oct2019  13.31  13%  12.50  166  17  3.24  187
1y Target  Oct2020  15.09  13%  13.45  203  14  3.60  221

*Cash per share balance net of debt and commercial paper

(click to enlarge)

F4Q19 Statements of Operations Revenues F4Q19e F4Q18* Y/Y% -------- ------ ------ ----- iPhone 33,676 36,755 -8.4 Mac 7,759 7,340 5.7 iPad 4,627 3,983 16.2 W/H/A 5,672 4,223 34.3 -------- ------ ------ ----- Products 51,734 52,301 -1.1 Services 12,069 10,599 13.9 -------- ------ ------ ----- Tot Revs 63,804 62,900 1.4 Gross Margin Breakdown (est) -------- ------ ------ ----- Products 16,535 17,505 -5.5 Services 7,880 6,579 19.8 -------- ------ ------ ----- Tot GM 24,415 24,084* 1.4 -------- ------ ------ ----- Prod GM% 32.0% 33.5% -1.5 Svcs GM% 65.3% 62.1% 3.2 -------- ------ ------ ----- Tot GM% 38.3% 38.3% 0.0 Op Expns 8,772 7,966 10.1 -------- ------ ------ ----- OpIncome 15,643 16,118 -2.9 Op Mrgn% 24.5% 25.6% -1.1 OIE 216 303 -28.8 -------- ------ ------ ----- Pre-Tax 15,859 16,421 -3.4 Tax Rate 16.5% 14.0% 2.5 Tax Prov 2,617 2,296 14.0 -------- ------ ------ ----- Net Incm 13,242 14,125 -6.2 Net Mrg% 20.8% 22.5% -1.7 Dil Shrs 4,519 4,848 -6.8 -------- ------ ------ ----- EPS $2.93 $2.91 0.6 Amounts in millions except EPS in dollars and ratios in % * F4Q18 actual as reported except Gross Margin Breakdown



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Naveen Kumar

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

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