With a nearly 50% increase in AAPL stock price in the first quarter, I thought it was time to revisit my AAPL long thesis. While I view AAPL as still being cheap, I started looking at some of the expectations for this quarter and they seemed high.
I created the 10 year financials (which are linked below). With the tremendous growth of AAPL revenue and profits, I do not see much value in the historical numbers. I think the best metric for AAPL is EPS, I did keep EBITDA, FCF simple, and FCF numbers there for anyone interested in looking at those numbers.
One thing that I did find interesting was that the cash on the balance sheet on AAPL is slightly misleading. AAPL has cash on the balance sheet that is larger then the book value of the company. When I saw this I thought I had made an error but it turns out that the Accounts Payable and Accrued Expenses are very high relative to Accounts Receivable.
I also created a projection for year end 2012, EPS, cash on balance sheet, etc. What I am looking at is what stock price is reasonable? I could see 800 or 850 before I would take profits. (I could reduce before that but just for risk management purposes). I think my EPS of $40.00 per share is very conservative.
https://docs.google.com/spreadsheet/ccc?key=0At1Wluk5zm-ZdFNmbkpZWEhVQnZBSlpITkk2Tnk0Y1E
Where I see the most value is looking at the past sales data by product line to see if expectations are reasonable. On the third tab, you can see past actual numbers and some analyst expectations that I have run across online.
Some of the expectations seem too high for me. However, I think about the second price point with iPad and think about how that helped iPhone numbers. In the end, I can see the numbers being hit, so unless we see a further increase in AAPL shares in the run up to earnings, I will sit tight with my shares and know that we could see some giveback in earnings on a product sales miss or a guidance miss.
Showing posts with label AAPL. Show all posts
Showing posts with label AAPL. Show all posts
Sunday, April 1, 2012
Thursday, March 22, 2012
SPX 3-22-12
Lackluster news out of China and Europe overnight but, another decent jobs report out of the US has us sitting slightly red at around 8:45am eastern.
All I have to say is that the bears cannot fail here. Everything has aligned --- gap through 1400 support, metals/energy/AAPL down, DX up, even RSI/MACD look more overbought than oversold which is very atypical for mornings of late.
The gap MUST hold.
Based on triangle formed with the last three trading days:
Bearish target: 1390 SPX
Bullish target (if gap should fail): 1420 SPX
Chart at the moment (looks like a little bear flag but will we get some selling to break down?):
All I have to say is that the bears cannot fail here. Everything has aligned --- gap through 1400 support, metals/energy/AAPL down, DX up, even RSI/MACD look more overbought than oversold which is very atypical for mornings of late.
The gap MUST hold.
Based on triangle formed with the last three trading days:
Bearish target: 1390 SPX
Bullish target (if gap should fail): 1420 SPX
Chart at the moment (looks like a little bear flag but will we get some selling to break down?):
Wednesday, March 7, 2012
SPX 3-7-12
We have rallied for 3 months without much of a respite. Yet, the buy buy buy market took a break yesterday selling off about 1.5% and all the media pundits were crying about such a horrible day. Seriously?
Let's cut to the facts. A rising wedge has broken and now we sell until we find a support line that holds a few times and then we'll be back to mindless buying once again.
The support line that held yesterday was the 34 dma at 1342.82. Of course, there was a buying surge at 3:50pm yesterday that got us above that line, and the futures pretty much rallied all night to 1348ish. It appears to be a two push up and a bear flag so perhaps the overnight games are over and the dumping will begin at open.
If the 34 dma should fail, my near term support lines are 1325-1326 formed by the gap up on 2/3/12 followed by the 50 dma at 1321.35.
Hourly chart on the Futures is already starting to break down out of the bear flag however, I am concerned that VWAP (orange lines) will keep the market from going down. Only volume busts VWAP and with the exception of yesterday, volume has been non-existent on the downside. Once it kisses VWAP, bears are toast. Yesterday, despite the massive selling, we managed to avoid kissing VWAP, and thus, could continue selling without interruption from the mean reversion traders.
Bears are also fighting against the fact that yesterday was a major distribution down day. NYSE decliners were >2700 etc. Usually such days are followed by a bounce.
Lastly, the iPad3 press conference is today and we all know that AAPL can hold up the NQ which will in turn, keep the rest of the market afloat. AAPL made a nice panic bottom yesterday, early on, and almost made it back to green territory by close on this news. Anyone else find it odd that AAPL (now the largest market cap in the world) still trades like a penny stock with crazy bid/ask spreads?
Let's cut to the facts. A rising wedge has broken and now we sell until we find a support line that holds a few times and then we'll be back to mindless buying once again.
The support line that held yesterday was the 34 dma at 1342.82. Of course, there was a buying surge at 3:50pm yesterday that got us above that line, and the futures pretty much rallied all night to 1348ish. It appears to be a two push up and a bear flag so perhaps the overnight games are over and the dumping will begin at open.
If the 34 dma should fail, my near term support lines are 1325-1326 formed by the gap up on 2/3/12 followed by the 50 dma at 1321.35.
Hourly chart on the Futures is already starting to break down out of the bear flag however, I am concerned that VWAP (orange lines) will keep the market from going down. Only volume busts VWAP and with the exception of yesterday, volume has been non-existent on the downside. Once it kisses VWAP, bears are toast. Yesterday, despite the massive selling, we managed to avoid kissing VWAP, and thus, could continue selling without interruption from the mean reversion traders.
Bears are also fighting against the fact that yesterday was a major distribution down day. NYSE decliners were >2700 etc. Usually such days are followed by a bounce.
Lastly, the iPad3 press conference is today and we all know that AAPL can hold up the NQ which will in turn, keep the rest of the market afloat. AAPL made a nice panic bottom yesterday, early on, and almost made it back to green territory by close on this news. Anyone else find it odd that AAPL (now the largest market cap in the world) still trades like a penny stock with crazy bid/ask spreads?
Wednesday, October 19, 2011
Apple (AAPL) reports 4Q 2011, another record quarter
Apple reported another record quarter. Below are units sold for their 4 major product lines with comparisons sequentially and Year over Year (YoY) .
After product refreshes of the iPhone in 4Q2010 and iPad in 3Q2011, sale increases of 68% and 97% are seen. Using a conservative number of a 25% increase for 1Q for iPhone, would put sales near 21.33 million units. Using 34% which is half of the 68% increase from previous iPhone 4 update, would put sales near 25.53 million units.
Valuation (in billions of dollars)
Even though we saw revenue growth of 66% for FY2011, guidance for the first quarter is for 38% growth. Using the lower growth number and half the growth rate (giving a strong margin of safety) or a multiple of 19x.
Free Cash Flow calculation. I like to ignore changes in working capital and keep stock options as an expense as that is a real cost, regardless that it does not have a cash cost.
FCF = NI + Dep - CapEx - Acqusitions (3 years amortized) - Intangibles (3 years amortized)
22.284 = 25.922 + 1.814 - 4.260 - 0.294 - 1.192
Projected Stock Price = (FCF x Multiple + Cash Equivalents - Debt) / Diluted Shares
537.47 = (22.284 x 19 +81.57 - 0) / 0.93951
After product refreshes of the iPhone in 4Q2010 and iPad in 3Q2011, sale increases of 68% and 97% are seen. Using a conservative number of a 25% increase for 1Q for iPhone, would put sales near 21.33 million units. Using 34% which is half of the 68% increase from previous iPhone 4 update, would put sales near 25.53 million units.
Valuation (in billions of dollars)
Even though we saw revenue growth of 66% for FY2011, guidance for the first quarter is for 38% growth. Using the lower growth number and half the growth rate (giving a strong margin of safety) or a multiple of 19x.
Free Cash Flow calculation. I like to ignore changes in working capital and keep stock options as an expense as that is a real cost, regardless that it does not have a cash cost.
FCF = NI + Dep - CapEx - Acqusitions (3 years amortized) - Intangibles (3 years amortized)
22.284 = 25.922 + 1.814 - 4.260 - 0.294 - 1.192
Projected Stock Price = (FCF x Multiple + Cash Equivalents - Debt) / Diluted Shares
537.47 = (22.284 x 19 +81.57 - 0) / 0.93951
Tuesday, November 23, 2010
Dell Inc (DELL) stock is too cheap
Dell Inc (DELL) closed at $13.96 on November 22nd, 2010. Over the past year, DELL has traded in a range of $11.34 to $17.52.
Being a value investor, I am always looking for intrinsically cheap value stocks. Many times, a particular stock is cheap for a reason (declining business, litigation issues, etc). In some instances, the market accidentally misprices a stock that still has plenty of growth. DELL is one of these stocks that is accidentally mispriced. DELL has plenty of growth while trading at a low valuation.
Let's take a look at the balance sheet from the most recent earnings results on November 18th (3rd Quarter Fiscal Year 2011).
http://i.dell.com/sites/content/corporate/secure/en/Documents/FY11_Q3_rtyu_BalanceSheet.pdf
Cash Equivalents 14B
Debt 6B
Services/Warranty Liabilities 6.5B
Net Cash 1.5B
Market Cap 26.9B
Enterprise Value 39.4B
As you can see, there is 1.5B in Net Cash on the balance sheet, or $0.78 per share.
Next is the Cash Flow section where we can look at the Trailing Twelve Months
http://i.dell.com/sites/content/corporate/secure/en/Documents/FY11_Q3_rtyu_CashFlows.pdf
Operating Cash Flow (after subtracting Stock Compensation) 3.4B
Capital Expenditures 400MM
Free Cash Flow (FCF) 3B
The market is currently valuing 3B in FCF at 8.5x (subtracting net cash). The FCF number is more conservative as Account Receivables have grown by 700MM. A large portion of this growth has been from Dell Financial Services which is no longer in partnership with CIT Group. (For more information see slide 10 and 32 linked below).
Taking a look at the growth side, DELL increased revenues by 19% YoY. The consumer business is turning the corner, breaking even this quarter after net losses previously. Even though DELL missed the initial push into retail channel (most consumers needs to touch and feel the laptop before buying), DELL is catching up to the competition. Commercial and Enterprise space are both strong with the Perot acquisition creating opportunities and synergies.
Presentation from DELL investor relations
http://i.dell.com/sites/content/corporate/secure/en/Documents/FY11_Q3_rtyu_Presentation.pdf
As far as valuation, I am looking for a valuation in the range of 10x - 12x conservative FCF for a stock price of $16.50 to $19.80.
Full Disclosure: Long DELL.
Being a value investor, I am always looking for intrinsically cheap value stocks. Many times, a particular stock is cheap for a reason (declining business, litigation issues, etc). In some instances, the market accidentally misprices a stock that still has plenty of growth. DELL is one of these stocks that is accidentally mispriced. DELL has plenty of growth while trading at a low valuation.
Let's take a look at the balance sheet from the most recent earnings results on November 18th (3rd Quarter Fiscal Year 2011).
http://i.dell.com/sites/content/corporate/secure/en/Documents/FY11_Q3_rtyu_BalanceSheet.pdf
Cash Equivalents 14B
Debt 6B
Services/Warranty Liabilities 6.5B
Net Cash 1.5B
Market Cap 26.9B
Enterprise Value 39.4B
As you can see, there is 1.5B in Net Cash on the balance sheet, or $0.78 per share.
Next is the Cash Flow section where we can look at the Trailing Twelve Months
http://i.dell.com/sites/content/corporate/secure/en/Documents/FY11_Q3_rtyu_CashFlows.pdf
Operating Cash Flow (after subtracting Stock Compensation) 3.4B
Capital Expenditures 400MM
Free Cash Flow (FCF) 3B
The market is currently valuing 3B in FCF at 8.5x (subtracting net cash). The FCF number is more conservative as Account Receivables have grown by 700MM. A large portion of this growth has been from Dell Financial Services which is no longer in partnership with CIT Group. (For more information see slide 10 and 32 linked below).
Taking a look at the growth side, DELL increased revenues by 19% YoY. The consumer business is turning the corner, breaking even this quarter after net losses previously. Even though DELL missed the initial push into retail channel (most consumers needs to touch and feel the laptop before buying), DELL is catching up to the competition. Commercial and Enterprise space are both strong with the Perot acquisition creating opportunities and synergies.
Presentation from DELL investor relations
http://i.dell.com/sites/content/corporate/secure/en/Documents/FY11_Q3_rtyu_Presentation.pdf
As far as valuation, I am looking for a valuation in the range of 10x - 12x conservative FCF for a stock price of $16.50 to $19.80.
Full Disclosure: Long DELL.
Thursday, October 7, 2010
Equinox (EQIX) the first sign of market leaders faltering?
The small revenue miss for Equinox (EQIX) caused quite a bit of collateral damage today in the Cloud computing space. VMware (VMW), F5 Networks (FFIV), Akamai Technologies (AKAM), Salesforce.com (CRM), and Citrix Systems (CTXS) were all down 7+%. This could be a sign that we are at a short term top in the markets.
Other high flying stocks that have faltered this week are Netflix (NFLX),Open Table (OPEN) Baidu (BIDU), Amazon (AMZN), and Priceline (PCLN).
Apple (AAPL) is still holding up nicely. If AAPL falters, look out below.
Other high flying stocks that have faltered this week are Netflix (NFLX),Open Table (OPEN) Baidu (BIDU), Amazon (AMZN), and Priceline (PCLN).
Apple (AAPL) is still holding up nicely. If AAPL falters, look out below.
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