AAPL Target Prices

  • Posted: 27 December 2009 09:58 PM

    I did a cursory tally of Apple’s non-GAAP or “Adjusted Net Income” for each quarter of FY ‘09, using the rounded results Apple published in its quarterly press releases. The results indicate net earnings of about $8.75 billion. Using 915 million shares as the average number of fully diluted shares outstanding for the year, the results work out to adjusted net income of $9.56 per share.

    Applying a 25% trailing p/e value to the shares a current target price works out to about $239 per share. AAPL, despite Thursday’s new high, is trading at a discount or below that p/e valuation. This is noteworthy because a 25 trailing p/e multiple is a lower earnings growth rate than most of us expect.

    I’m working on a valuation model based on forward estimates for the next three years.

    At Thursday’s closing price I see plenty of value to be captured in the shares for long-term investors stepping in now.

         
  • Posted: 28 December 2009 06:54 AM #1

    I haven’t done it but I think this analysis could have been done in each of the last 5 Decembers. The numbers have changed but the conclusion would be the same. This company is fighting an unseen demon dedicated to undervaluing the stock. Someday there could be an Apple bubble. I’m crossing my fingers.

         
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    Posted: 28 December 2009 12:43 PM #2

    If this is an ignorant question my apology but do know definitively what Q aapl will report non GAAP (no subscription accounting)?  I noticed an analysts EPS upgrade today (can’t find the story now) that referenced non GAAP EPS solely in the report.

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  • Posted: 28 December 2009 11:01 PM #3

    runedge - 28 December 2009 04:43 PM

    If this is an ignorant question my apology but do know definitively what Q aapl will report non GAAP (no subscription accounting)?  I noticed an analysts EPS upgrade today (can’t find the story now) that referenced non GAAP EPS solely in the report.

    I believe Apple has to make the change at or before the end of this fiscal year. The numbers I’m looking at are staggering in terms revenue and earnings with projected iPhone revenue fully baked in to each quarter’s results.

         
  • Posted: 28 December 2009 11:03 PM #4

    I’ll put it another way: I have a model (I’m confirming the numbers) of Apple reaching over $400 per share with a trailing p/e of 25 within two years.

         
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    Posted: 30 December 2009 06:51 PM #5

    DawnTreader - 29 December 2009 03:03 AM

    I’ll put it another way: I have a model (I’m confirming the numbers) of Apple reaching over $400 per share with a trailing p/e of 25 within two years.

    The problem with models is they are subject to revisions.  The beauty of Apple of late is most of the models have been revised upward which has resulted in the stock price reaching all time highs and analyst reaching reasonable valuations, that is until Apple releases the next big thing or announces actual results which blow past the models.  In 2010 Apple will switch the majority of Iphone revenue from deferred accounting.  That means everyone who can’t figure out the deferred revenue accounting will suddenly realize that Apple had 42.85B and 9.66 EPS in FY2009 and if we assume about 25% growth we get somewhere around 53B revenue and $12 of earnings which support a $300 price target.  So then the question becomes what kind of growth rate should we model and what factors may be coming.  Coming out of recession we should hope the Mac business continues its above PC trend growth.  The other hardware tends to grow with the Mac business.  The Iphone is growing above the smartphone market trend and the Itunes music business and the rest of the digital apps/movies are the trend and they should grow rapidly as folks move to digital libraries.  The Ipod segment is more mature IMO and will show slight growth as the economy improves.  The unknowns are any new hardware and software services.  We can make an educated guess that Apple will introduce the tablet device and if it follows a typical S curve it will be in the early adoption phase in 2010 with maybe a few million sales so it’s impact on the overall business of Apple will be small in 2010 but important for future growth.  Couple other areas which should be clarified a bit in 2010 are what are Apple’s plans for their PA Semi SOCs and why is Apple building a huge data center.  These two initiatives are more about 2011 growth but we should get an idea in 2010 as far how they may add to Apple’s future growth.  I like the $400 and look forward to 2011.

         
  • Posted: 30 December 2009 11:24 PM #6

    pats, I’m actually looking at around $60 billion in FY ‘10 “adjusted revenue.” Granted, I’m seeing strong growth in the iPhone market but I’m not factoring in any net revenue from tablet sales at this time.

         
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    Posted: 31 December 2009 10:37 AM #7

    DawnTreader - 31 December 2009 03:24 AM

    pats, I’m actually looking at around $60 billion in FY ‘10 “adjusted revenue.” Granted, I’m seeing strong growth in the iPhone market but I’m not factoring in any net revenue from tablet sales at this time.

    I would call that an aggressive revenue target.  60B would be about 40% revenue growth YOY.  The Iphone is capable of that kind of growth and maybe Itunes and Mac hardware but I would be surprised by that high of number.  The good news is that the analyst on average are looking at EPS of 2010 7.79, 2011 9.42, 2012 10.57 vs 6.29 2009 actual we get average EPS growth rate of 22.4% 2010, 20.9% 2011, 12.2% 2012.  We have lots of room to beat which will result in future stock upgrades.

         
  • Posted: 31 December 2009 11:50 PM #8

    pats, working back into the iPhone-related revenue numbers from Apple’s financial reports I see non-GAAP iPhone-rleated revenue in the last fiscal year at about $12 billion. I can see that number doubling this fiscal year. Forecasting a 20% gain in Mac revenue, 5% for iPods and a doubling of iTunes revenue brings me closer to $60 billion. Should Apple see iPhone shipments anywhere near 42 million units, we are there on revenue.