Apple

Inc,

Arkansas State University

Apple

Current price: $108.83

Target price: $205
Recommendation: Buy

Key Statistics
Current Price
52 Week Range
Market Capitalization ($billion)
Avg Daily Vol (Million)
Institutional Ownership(%)

108.83
$68.33 - 111.74
500
54
63.0%

Beta

0.90

Dividend Yield

1.7%

Trailing P/E

17.30

Price/Sales

6.43

Enterprise Value/EBITDA
Source: Yahoo Finance

10.73

Apple Inc., formerly Apple Computer, Inc., is a

multinational corporation that produces consumer
electronics, computer software, and commercial servers.
Founders Steve Jobs and Steve Wozniak created Apple
Computer on April 1, 1976.
Today, Apple is the largest technology firm in the world,
with annual revenues of more than $60 billion.

Business Description

Computers
Cellular phones
MP3 players
Software
Online Music Vendor
Distributes third party computer Accessories
Apple TV an online television adapter

Product line-up

subtitutes

buyer
power

barrier to
entry
5
4
3
2
1
0

competition

supplier
power

Apples five forces analysis

Porters five forces (radar chart)

subtitutes

buyer power

Industry

barrier to
entry
5
4
3
2
1
0

competition

supplier
power

Financial Results
Apple reported highest ever 3th quarter revenue and earnings:
Revenue increase over 6.22 billion or 29%, driven by strong iPad and iPhone sales
Robust growth from iTunes revenue
2013 Fiscal Year EPS: $5.68, up 73%

iPhone
Apple sold over 38.8 million iPhones over the last quarter and 500 million iPhone in total

Apple will also unveil a new retina MacBook

The ultra-portable laptop is expected to be 50% thinner than the existing MacBook
Will contain flash-based memory instead of a disc drive.
Retina screen brings better image and video quality for users

Current Events

During the analyzed period ( from 2009 to 2013), Apples

total revenues increased continuously. It went up by
around $130 billion dollars from $42905 in 2009 to
170000 in 2013 (by the end of 2013 it quadrupled)
That indicates a strong positive trend.

Revenue

Revenue

Apples Market Share in the US

The Company manages it business on a geographic

basis. The operating segments consist of Americas,
Europe, Japan, and Retail.

Geographical Sales

Liquidity
Current Ratio
1.67x
Quick Ratio
1.64x
Profitability
Profit Margin
37.62%
Operating Margin
29.35%
Efficiency
Inventory Turnover 60.43x
Receivable Turnover
8.28
Asset Turnover
0.83
Leverage
2.08

Ratio and Dupont analysis

Data Source

Actuals

Year

Revenue

2011

Year +6

216,870.74
26.9%

256,009.26
18.0%

-56.1%

-62.4%

-66.0%

-66.0%

43,818.00
40.5%

68,662.00
43.9%

64,304.00
37.6%

73,736.05
34.0%
0.00

87,043.15
34.0%
0.00

0.0%

0.0%

0.0%

0.0%

0.0%

43,818.00
40.5%

68,662.00
43.9%

64,304.00
37.6%

73,736.05
34.0%

87,043.15
34.0%

5,850.00
5.404%

9,422.00
6.020%

10,151.00
5.939%

12,880.78
5.788%

15,205.37
5.916%

Ann IS

=GP-SGA

Ann CF

313,532.89 377,048.84
22.5%
20.3%

-168,966.11 -206,931.71

-59.5%

%Revenue

-66.0%

#######
##

-302,016.40

#######
##

-66.0%

-66.0%

-66.0%

106,601.18 128,196.60
34.0%
34.0%
0.00
0.00
0.0%

0.0%

106,601.18 128,196.60
34.0%
34.0%
18,621.92
5.881%

457,600.61 471,328.63
21.4%

155,584.21 160,251.73
34.0%
34.0%
0.00
0.00
0.0%

0.0%

155,584.21 160,251.73
34.0%
34.0%

22,394.38
5.862%

27,178.65 27,994.01
5.886%
5.876%

-17,947.37 -22,103.29

-26,512.52 -27,306.00

Ann CF

-7,452

-9,402

-9,076

-13,158.19

-14,835.78

Ann CF

-6.8841%
5,760.00
5.3211%

-6.0074%
-299.00
-0.1910%

-5.3104%
6,480.00
3.7915%

-6.0673%
6,449.37
2.9738%

-5.7950%
5,610.23
2.1914%

-5.7242%
9,360.75
2.9856%

-5.8622%
10,244.19
2.7169%

-5.7938% -5.7934%
12,040.89 13,093.23
2.6313% 2.7779%

36,670.96

50,668.20

55,268.57

60,884.11

70,565.84

89,133.38 105,657.15

128,150.51 132,688.03

54,458.06

56,456.10

63,784.47

%Revenue

Changes in NWC

Year +5

-87,846.00 -106,606.00 -143,134.69

operating margin

Capital Expenditures

Year +4

-64,431.00

%Revenue

Non-cash charges (D&A, etc.)

Year +3

Ann IS

gross margin

Operating Income (EBIT)

Year +2

1
156,508.00
44.6%

Gross Profit =Rev-COGS

170,910.00
9.2%

Forecasts
Year +1

108,249.00

%Revenue

SGA

2013

Ann IS

growth

Cost of Goods Sold including

D&A

2012

%Revenue

Free Cash Flow to the FirmSee formula

Present Value

67,628.80

73,368.78
1,507,818.48terminal value V4=FCF5/(WACC-g)

Sum of PVs (Firm Value)

Add: Cash
Minus: Debt
Equity Value
Shares Outstanding

Intrinsic Value $
Current Price $
Upside Potential

655,953.10
40,546.00 Ann BS
16,960.00 Ann BS or disclosure in annual report
6795390000 =V + cash - debt
5860.00Ann IS or yahoo!Finance key statistics (=mcap/price)

863,256.87then discount V4 to present value

Cost of
Capital Inputs
10-year Tbond rate
Market risk
premium
Beta

205.21

Cost of Equity

99.62

Cost of Debt

105.99%

WACC

2.50%
11.00%Estimates
1.26Regression
11.2400%CAPM
0.00%Ann IS and BS: interest/debt
11.8000%From WACC sheet

Sales growth of 10% over the next five years

Long-term free cash flow growth of 8%
Equity value of firm: around $679 billion
FCF price target: $205

FCF VALUATION

Cost of debt: 0%
Cost of equity (CAPM): 11.24%
Tax Rate: 25.29%
Beta: 1.26
WACC: 12.59%

Valuation Cost of capital

Capital Structure
Total Debt to Total Equity
31.64
Total Debt to Total Capital
24.04
Total Debt to Total Assets
15.22
Long-Term Debt to Equity
25.99
Long-Term Debt to Total Capital
19.74

Macroeconomic
- The gloomy global economic conditions, tighter access to
credit, increase of unemployment could lower the demand of
company`s products and services.
Political & regulatory uncertainties
- Regulations in countries relating to mobile communications
and software security requirement usually change including the
restrictions on production, manufacture or network carriers
rights, putting negative effect on company`s productions
design and application experience.

Risk Analysis

CONCLUSION
Massive
Brand Power
Innovation
brand design
proven
Successful

High Sales
and Dividend
Growth

BUY