Professional Documents
Culture Documents
Company Overview
II. Product line-up
III. Geographical Sales
IV. Apple 10 yr Stock chart
V. Industry Overview
VI. Current Events
VII. Fundamental Analysis
VIII. DuPont Analysis
IX. Market Share
X. Pro Forma Income Statement
XI. Relative Valuation
XII. Absolute Valuation
XIII. Recommendations
I.
Agenda
Company Overview
Computers
Cellular phones
MP3 players
Software
Online Music Vendor
Distributes third party computer
Accessories
Apple TV an online television adapter
Product line-up
Mac Desktop
1%
5%
10%
Mac Portables
6%
17%
Ipod
26%
35%
Revenue by Product
Geographical Sales
Industry Overview
Financial Results
Apple reported highest ever 4th quarter revenue and earnings:
Revenue increase over 6.22 billion or 29%, driven by strong Mac and iPods sales
Robust growth from iTunes revenue
2007 Fiscal Year EPS: $3.93, up 73%
iPhone
Apple sold over 1.1 million iPhones over the last quarter,
Began selling iPhones in Europe November 9, 2007
Apple plans to sell 10 million iPhones in 2008
Current Events
Income/Cash Flow
Sales
Net Income
Cash Flow from Operations
80.00%
60.00%
40.00%
20.00%
0.00%
-20.00%
-40.00%
2000-2001
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2000-2006
7.07%
8.10%
33.38%
68.27%
38.65%
24.29%
17.03%
-1.61%
19.14%
18.83%
15.82%
9.67%
1.30%
10.77%
3.60%
44.20%
9.98%
8.68%
5.69%
11.70%
11.52%
9.93%
16.87%
8.91%
15.78%
6.69%
12.42%
19.23%
12.75%
+ 0.0
-5.04%
9.35%
13.57%
6.82%
11.25%
8.14%
6.56%
3.25%
-2.38%
4.58%
11.32%
7.51%
8.69%
5.10%
5.36%
AAPL
-32.82%
DELL
14.16%
HPQ
1.75%
MSFT
Industry Avg
SP500
2001-2002
Sales Growth
1400.00%
1200.00%
1000.00%
800.00%
600.00%
400.00%
200.00%
0.00%
-200.00%
-400.00%
2000-2001
2001-2002
AAPL
-104.71%
DELL
-20.72%
HPQ
MSFT
Industry Avg
SP500
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2000-2006
-275.68%
4.62%
291.18%
25.46%
29.30%
24.05%
399.25%
49.77%
75.77%
23.76%
14.28%
-12.14%
-4.68%
6.23%
-56.99%
-178.86%
279.27%
58.10%
-5.97%
60.01%
38.23%
10.41%
-34.53%
-4.83%
32.57%
-0.27%
59.21%
0.54%
15.00%
6.13%
-85.74%
-33.33%
269.05%
103.87%
46.94%
6.25%
20.00%
4.27%
-113.68%
-89.20%
1270.00%
507.69%
-4.36%
14.41%
17.10%
4.33%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
-50.00%
-100.00%
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2000-2006
AAPL
-78.69%
-51.35%
221.11%
223.18%
171.41%
-12.43%
146.40%
30.08%
DELL
3.58%
-13.59%
4.96%
4.94%
63.51%
-29.16%
-11.68%
0.12%
HPQ
-60.10%
222.08%
-8.54%
5.95%
48.23%
22.95%
-7.45%
11.19%
MSFT
20.14%
24.84%
-24.54%
16.55%
11.30%
-16.49%
38.75%
7.89%
-5.34%
23.26%
0.51%
12.82%
10.96%
5.52%
16.00%
8.73%
3.70%
11.54%
-10.19%
7.21%
19.40%
-10.03%
22.16%
5.57%
Industry Avg
SP500
Operating Performance
ROE
ROA
EBIT
Net Profit Margin
Asset Turnover
80.000
60.000
40.000
20.000
0.000
(20.000)
(40.000)
(60.000)
2000
2001
2002
2003
2004
2005
2006
2007
AAPL
21.800
(0.922)
1.622
1.635
5.721
21.241
22.846
28.520
DELL
37.693
25.745
38.735
47.319
50.474
57.665
69.435
62.285
HPQ
20.220
10.267
(4.593)
5.647
8.648
8.077
13.337
18.549
MSFT
25.588
13.688
11.984
13.485
11.333
20.708
30.644
43.602
29.100
(1.800)
(34.900)
7.700
14.000
20.100
17.100
16.600
15.300
7.000
3.100
9.800
15.800
16.700
17.600
15.700
Industry Avg
SP500
ROE
25.000
20.000
15.000
10.000
5.000
0.000
(5.000)
(10.000)
2000
2001
2002
2003
2004
2005
2006
2007
AAPL
13.139
(0.577)
1.055
1.037
3.579
13.575
13.850
16.432
DELL
16.756
11.051
13.533
15.574
16.210
15.880
12.929
11.017
HPQ
10.218
4.510
(2.233)
2.902
4.479
4.103
6.361
8.272
MSFT
20.491
10.937
9.290
10.490
9.053
15.528
18.910
22.712
16.800
(4.400)
(3.800)
2.800
8.200
12.600
10.400
12.100
10.000
1.700
1.000
3.100
7.600
8.300
8.400
7.80
Industry Avg
SP500
ROA
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00
-5,000.00
2000
2001
2002
2003
2004
2005
2006
2007
AAPL
1,121.00
-25.00
129.00
126.00
396.00
1,808.00
2,818.00
5,008.00
DELL
2,912.00
2,719.00
2,622.00
3,421.00
4,064.00
4,726.00
3,875.00
3,786.00
HPQ
4,653.00
2,318.00
2,235.00
3,690.00
4,705.00
5,018.00
7,354.00
9,175.00
MSFT
14,977.00
9,560.00
9,695.00
12,914.00
15,129.00
19,630.00
19,709.00
21,740.00
2,035.00
819.00
570.00
1,064.00
1,517.00
2,112.00
2,289.00
2,601.00
1,227.00
787.00
466.00
903.00
1,270.00
1,563.00
1,695.00
1,591.00
Industry Avg
SP500
EBIT
60.000
40.000
20.000
0.000
(20.000)
(40.000)
(60.000)
(80.000)
(100.000)
(120.000)
(140.000)
(160.000)
AAPL
9.846
-0.690
1.132
1.096
3.213
9.533
10.298
14.563
DELL
6.494
4.509
5.750
6.240
6.514
6.427
5.149
4.845
HPQ
7.250
3.065
(2.33)
2.901
4.170
3.608
5.462
6.760
MSFT
42.039
25.035
20.387
24.816
21.376
31.896
28.524
27.511
35.000
(133.40)
(21.20)
3.000
10.200
16.700
15.200
11.700
0.000
(33.00)
(11.50)
(1.60)
7.600
7.100
9.100
0.089
Industry Avg
S&P 500
3.000
2.500
2.000
1.500
1.000
0.500
0.000
2000
2001
2002
2003
2004
2005
2006
2007
AAPL
1.335
0.836
0.932
0.947
1.114
1.424
1.345
1.128
DELL
2.580
2.451
2.354
2.496
2.488
2.471
2.511
2.274
HPQ
1.409
1.472
0.957
1.000
1.074
1.137
1.164
1.224
MSFT
0.487
0.437
0.456
0.423
0.424
0.487
0.663
0.826
Industry Avg
1.000
0.800
0.800
0.800
0.800
0.800
0.800
0.800
S&P 500
1.200
1.100
1.000
1.000
1.100
1.100
1.100
1.100
Asset Turnover
5.0000
4.5000
4.0000
3.5000
3.0000
2.5000
2.0000
1.5000
1.0000
0.5000
0.0000
2000
2001
2002
2003
2004
2005
2006
2007
AAPL
2.8076
3.3880
3.2497
2.4977
2.6613
2.9538
2.25
2.36
DELL
1.4512
1.2261
1.0296
1.0370
0.9905
1.1295
1.00
1.30
HPQ
1.6105
1.5027
1.4595
1.5458
1.2685
1.2016
1.30
1.20
MSFT
3.1069
4.2371
3.8117
4.2202
4.6860
2.8587
2.10
1.60
Industry Avg
2.9000
2.7000
2.5000
2.5000
2.7000
2.8000
2.70
2.70
S&P 500
2.2000
2.3000
2.2000
2.3000
2.3000
2.3000
2.20
2.20
Current Ratio
5.000
4.500
4.000
3.500
3.000
2.500
2.000
1.500
1.000
0.500
0.000
2000
2001
2002
2003
2004
2005
2006
2007
AAPL
2.790
3.381
3.223
2.474
2.623
2.907
2.21
2.32
DELL
1.37
1.18
0.99
1.00
0.99
1.13
1.00
1.20
HPQ
1.20
1.11
1.24
1.29
1.27
1.20
1.10
1.00
MSFT
3.10
4.23
3.76
4.17
4.69
2.86
1.90
1.50
Industry Avg
2.80
2.50
2.40
2.40
2.60
2.70
2.60
2.50
S&P 500
1.80
1.80
1.80
1.90
1.90
1.90
1.80
1.80
Quick Ratio
80.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
0.000
2000
2001
2002
2003
2004
2005
2006
2007
AAPL
9.771
7.559
11.139
9.327
10.752
16.694
17.993
16.619
DELL
10.590
11.483
12.098
13.955
13.946
12.775
10.688
8.976
HPQ
6.454
6.440
5.343
6.392
7.047
7.494
7.650
7.585
MSFT
8.677
7.560
7.436
7.271
7.845
7.398
7.154
6.818
7.900
7.700
7.300
8.100
8.600
8.600
8.700
8.900
15.300
15.900
20.700
26.000
73.100
76.100
55.400
21.000
Industry Avg
S&P 500
Receivables Turnover
Debt to Equity
AAPL
DELL
HPQ
MSFT
Industry Avg
S&P 500
Financial Leverage
AAPL
DELL
HPQ
MSFT
Industry Avg
S&P 500
TIE
AAPL
DELL
HPQ
MSFT
Industry Avg
S&P 500
2000
7.305
7.892
34.323
0.000
16.300
73.300
2001
8.087
10.505
39.823
0.000
31.100
66.600
2002
7.717
11.301
23.090
0.000
25.400
73.000
2003
7.199
9.190
21.120
0.000
25.400
86.100
2004
2005
0.000
0.000
8.136
9.149
18.390 15.439
0.000
0.000
20.400 45.700
60.800 138.300
2000
1.656
2.100
2.200
1.261
1.700
2.400
2001
1.536
2.700
2.300
1.244
1.900
1.100
2002
1.538
3.100
2.000
1.296
1.700
2.500
2003
1.614
3.000
1.900
1.259
1.900
3.000
2004
1.586
3.200
1.900
1.261
1.800
1.900
2000
51.700
N/A
21.1
N/A
64.6
1037.4
2001
5.700
57.9
N/A
N/A
33.4
48.7
2002
27.500
90.4
10.5
N/A
20.7
43.9
2003
15.750
201.2
14.5
N/A
255.9
57.3
2004
62.800
290.3
17
N/A
122.8
68.1
Long-term Solvency
2006
0.000
21.546
18.617
21.617
21.100
68.100
2007
0.000
11.681
23.315
0.000
28.200
81.800
2005
1.550
4.100
2.000
1.472
2.300
4.500
2006
1.723
7.700
2.200
1.735
2.100
3.100
2007
1.744
4.600
2.300
2.031
2.900
9.800
2005
N/A
315.1
12.2
N/A
359.3
222.8
2006
N/A
133.60
20.70
N/A
349.90
316.10
2007
N/A
84.10
25.20
N/A
461.20
753.50
ROE (%)
Asset Turnover
Net Profit Margin
Financial Leverage
2000
21.800
2001
(0.922)
2002
1.622
2003
1.635
2004
5.721
2005
21.241
2006
22.846
2007
28.520
1.335
9.846
0.836
-0.690
0.932
1.132
0.947
1.096
1.114
3.213
1.424
9.533
1.345
10.298
1.128
14.563
1.659
1.598
1.537
1.576
1.599
1.565
1.649
1.736
DuPont Analysis
2000
2001
2002
2003
Apple
7,983.00
5,363.00
5,742.00
6,207.00
2004
2005
30,045.0
Dell
64,380.0
HPQ
113,476.0
MSFT
62,382.0
IBM
102,077.0
MOT
40,163.0
GOOG
QCOM
JAVAD
RIMM
19.10
3,196.80
86.40
2,679.80
439.50
2,915.00
1,465.90
3,847.00
3,189.20
4,880.00
16,694.0
10,171.0
14,568.0
7,961.0
Total
241,428.20 238,618.30 242,628.20 276,486.50 313,023.60 340,879.40 379,580.90 307,620.00 461,917.00
Market Share
Sales
Apple
2000
3.307%
2001
2.248%
2002
2.367%
2003
2.245%
Market Share
2004
2.645%
2005
4.087%
2006YTD 2007
5.089%
5.491%
2008
6.5%
379,580.90
307,620.00
2006
5.09%
2007
7.80%
461,917.00
2008
6.50%
Desktop
3,319.0
17.18%
4,020.0
16.75%
Portables
4,056.0
21.00%
6,294.0
26.22%
Ipod
7,676.0
39.74%
8,305.0
34.60%
1,885.0
9.76%
2,496.0
10.40%
123.0
0.51%
1,100.0
5.70%
1,260.0
5.25%
1,279.0
6.62%
1,508.0
6.28%
19,315.0
100.00%
24,006.0
100.00%
30,045.0
13,717.00
15,852.00
21,559.95
8,154.00
33.97%
8,485.05
5,598.00
28.98%
71.02%
66.03%
3,145.0
3,745.0
Op Exp as % of Revenue
16.28%
15.60%
$2,453.00
$4,409.00
Total COGS
GROSS PROFIT
OPERATING INCOME
71.76%
4,482.71
14.92%
4,002.33
Unusual Item
$2,453.00
$4,409.00
4,002.33
394.0
647
657.5624
0.0
0.0
0.0
394.0
647.0
657.6
0.0
0.0
29.0
48.0
48.0
$2,818.00
$5,008.00
4,611.90
$829.00
$1,512.00
1,385.87
EAT
$1,989.00
$3,496.00
3,226.02
NET INCOME
$1,989.00
$3,496.00
3,226.02
Diluted Shares
877.5
889.3
905.3
EPS
$2.27
$3.93
3.56
29.42%
30.19%
30.05%
EBT
Income Taxes
Relative Valuation
2004
69.30
33.5
2.0687
2005
45.50
25.5
1.7843
2006
35.90
15.8
2.2722
2007
43.40
24.3
1.7860
P/E
2008
41
19.8
2.0707
2003
2004
69.30
19.5
3.5538
2005
45.50
28
1.6250
2006
35.90
29.3
1.2253
2007
43.40
21.7
2.0000
P/E
2008
41
17.3
2.3699
2003
2004
2005
2006
2007
P/E
2008
69.30
45.50
35.90
43.40
41
36.9
22.9
22.9
20.7
17
1.8780
1.9869
1.5677
2.0966
2.4118
2003
2004
69.30
2005
45.50
2006
35.90
2007
43.40
P/E
2008
41
131.7
0.2126
74.3
81.1
0.8545
45.7
0.9956
36.7
0.9782
65.1
0.6667
29.4
1.3946
2002
28.00
56.4
0.4965
2003
2004
69.30
39.1
1.7724
2005
45.50
38.1
1.1942
2006
35.90
26.7
1.3446
2007
43.40
34.4
1.2616
P/E
2008
41
22.7
1.8062
PE Comparable
AAPL
DELL
2000
12.80
47.8
0.2678
2001
101.00
23.5
4.2979
2002
28.00
51
0.5490
2003
PE Comparable
AAPL
HPQ
2000
12.80
32.9
0.3891
2001
101.00
13.8
7.3188
2002
28.00
22.8
1.2281
PE Comparable
2000
2001
2002
AAPL
12.80
101.00
28.00
MSFT
35.5
36.9
45.4
0.3606
2.7371
0.6167
2000
12.80
2001
101.00
2002
28.00
Industry Avg.
132.8
0.0964
178.3
0.5665
PE Comparable
AAPL
SP500
2000
12.80
106.9
0.1197
2001
101.00
86
1.1744
PE Comparable
AAPL
38.8
40.2
44.5
Relative Valuation
Average
AAPL/DELL
AAPL/HPQ
AAPL/MSFT
AAPL/Ind Avg.
AAPL/SP500
AAPL
AAPL
AAPL
AAPL
AAPL
/
/
/
/
/
Dell Price
HPQ Price
MSFT Price
Industry Price
SP500 Price
Industry Avg. /
Benchmark
Median
1.860829
2.477153
1.60624
0.624349
1.051916
E(price 2008)
using EPS1
125.89
100.08
113.66
69.78
96.51
87.07
1.786008
1.625
1.878049
0.666667
1.194226
E(price 2008)
using EPS2
176.11
140.00
159.00
97.61
135.00
87.07
Relative Valuation
$ 101.18
Using EPS2:
$ 141.54
Absolute Valuation
FCFF Model
Costs of Capital
CAPM
Another K
10 yr T-Strip:
Beta:
Risk Premium
CAPM=
4.26%
1.442
6.50%
4.26% + 1.442(6.5%)
k1 =
13.63%
5.16%
Costs of Capital
YTM:
Equity Premium:
k2 =
5.16%
3%
8.16%
2007
2006
2005
2004
2003
3,496.0
317.0
317.0
1,989.0
225.0
225.0
1,328.0
179.0
179.0
266.0
150.0
150.0
69.0
113.0
113.0
78.0
254.0
53.0
174.0
50.0
486.0
19.0
131.0
(11.0)
(1.0)
(1.0)
12.0
11.0
437.0
85.0
(16.0)
0.0
242.0
163.0
49.0
46.0
16.0
1,325.0
(221.0)
492.0
368.0
119.0
(385.0)
(76.0)
(357.0)
(105.0)
(121.0)
(64.0)
(8.0)
(45.0)
(1,459.0)
1,494.0
(2,666.0)
1,611.0
(185.0)
328.0
(201.0)
297.0
(201.0)
(11.0)
(34.0)
(30.0)
243.0
1,751.0
1,296.0
534.0
325.0
152.0
2,220.0
0.0
657.0
1,563.0
2,535.0
0.0
260.0
2,275.0
934.0
2.2
176.0
760.2
289.0
5.9
174.0
120.9
Absolute Valuation
Geometric Avg
5,470.0
0.0
986.0
4,484.0
147%
2008
5,829.20
PV(2007)
2008
2009
7,577.96
2009
2010
9,851.35
2010
2011
2012
12,806.75
2011
16,648.78
2012
2013
21,643.41
2013
Sum
K1:
5,129.85
5,868.72
6,714.01
7,681.06
8,787.39
10,053.07
44,234.11
K2:
5,389.42
6,477.67
7,785.66
9,357.77
11,247.32
13,518.41
53,776.26
Absolute Valuation
k1
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
0.1363
g
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
est(IV2013)
32,898.019
173,078.746
189,821.838
209,715.088
233,739.855
263,332.354
300,681.733
349,297.894
415,184.449
509,531.719
655,860.956
est(IV2007)
15283.10891
80405.48963
88183.663
97425.27445
108586.2237
122333.7197
139684.7533
162269.8845
192878.1529
236708.1355
304686.8689
k2
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
0.0816
g
0.00
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
0.1
est(IV2013)
54950.980
305305.107
358381.165
432029.339
541085.289
719163.992
1062130.382
1996418.135
14609302.800
-2808490.309
-1293899.604
est(IV2007)
34322.22
190692.7
223843.8
269844.3
337960.3
449187.7
663403.5
1246957
9124927
-1754175
-808166
Using
est(IV2013)1
est(IV2013)2
est(IV2013)3
est(IV2013)4
est(IV2013)5
est(IV2013)6
est(IV2013)7
est(IV2013)8
est(IV2013)9
est(IV2013)10
est(IV2013)11
E(FCFF2014)
4484.000
21859.846
22076.280
22292.714
22509.148
22725.582
22942.016
23158.450
23374.884
23591.319
23807.753
Absolute Valuation
Terminal Value
2009
3,472.62
3,832.94
2010
3,055.99
3,543.77
2011
2,689.35
3,276.41
2012
2,366.70
3,029.23
2013
2,082.76
2,800.69
Sum
$17,613.45
$20,628.76
36.99
61.79
Absolute Valuation
Recommendation
Buy 100 Shares