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AAPL
Apple, sales growth back above Indonesia
🎯 📱 📈 ▶️ $473
12 month free cashflow +$71,065m ⬇️
July 31st, 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the 3 minute explainer using the data file & model ⬇️
Sales
AAPL sales surprised us with an +11% growth in the 2Q (calendar not fiscal), back to faster than Indonesia. But remember that the 1Q & 2Q are by far the slowest, so this is not so significant. Product sales grew by +10%, services faster +15%. We expect sales to grew very slightly the next 12 months to a record $274.3bn.
Cashflow
Because of the higher than expected sales, cashflow was also better than we expected. Free cashflow was $11.5bn in the 2Q & the 12 months is at $71.1bn. The previously positive investment cashflow has come down though, so we see lower free cashflow in the next 12 months at $65.6bn. That’s down from the amazing peak of $125.5bn last year.
AAPL sales surprised us with an +11% growth in the 2Q (calendar not fiscal), back to faster than Indonesia. But remember that the 1Q & 2Q are by far the slowest, so this is not so significant. Product sales grew by +10%, services faster +15%. We expect sales to grew very slightly the next 12 months to a record $274.3bn.
Cashflow
Because of the higher than expected sales, cashflow was also better than we expected. Free cashflow was $11.5bn in the 2Q & the 12 months is at $71.1bn. The previously positive investment cashflow has come down though, so we see lower free cashflow in the next 12 months at $65.6bn. That’s down from the amazing peak of $125.5bn last year.
Slight sales growth, lower cashflow, high yield, higher target price...
Balance sheet
The balance sheet remains in net debt, at $79.3bn as of the 2Q. But that’s lower than the $95bn peak in 2017. AAPL has used debt to grow & now growth is a bit slower, we expect net debt to reduce. With our cashflow forecast, net debt will reduce to $72bn in 12 months including dividends & buybacks of $58bn.
Profit
Net profit increased by more than sales, +12% as depreciation was lower. The cash cost ratio of net debt plus depreciation & options minus sales as % of sales, has been increasing recently & was 74% in 2Q vs last 12 months 72%. We use 72% to predict the next 12 months profit of $64.6bn, which is growth of +11%.
Value
AAPL current market value has risen to $1.66tn. That’s 6.1x our sales forecast, 5.5x the value of the assets & 21.1x the equity with an utterly amazing 82% profitability. Yield is forecast 3.5%. We use our 1.6% cashflow valuation with a large 50% discount because of the high debt. This gives a still higher than current target price of $473.
The balance sheet remains in net debt, at $79.3bn as of the 2Q. But that’s lower than the $95bn peak in 2017. AAPL has used debt to grow & now growth is a bit slower, we expect net debt to reduce. With our cashflow forecast, net debt will reduce to $72bn in 12 months including dividends & buybacks of $58bn.
Profit
Net profit increased by more than sales, +12% as depreciation was lower. The cash cost ratio of net debt plus depreciation & options minus sales as % of sales, has been increasing recently & was 74% in 2Q vs last 12 months 72%. We use 72% to predict the next 12 months profit of $64.6bn, which is growth of +11%.
Value
AAPL current market value has risen to $1.66tn. That’s 6.1x our sales forecast, 5.5x the value of the assets & 21.1x the equity with an utterly amazing 82% profitability. Yield is forecast 3.5%. We use our 1.6% cashflow valuation with a large 50% discount because of the high debt. This gives a still higher than current target price of $473.
