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AAPL, still cheap, 3% yield
🎯 📱 📈 USD152
Last 12-month cashflow +USD67bn ⬇️
October 30th 2020
⏰ 1 minute read
⏰ 1 minute read
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Sales
Sales growth was a small positive +1% in the 3Q, USD64.7bn but 3% ahead of our forecast. Sales were up +8% from the 2Q which is slower than the normal double digits growth. Devices were +8% from the 2Q, services +11%, but device sales remain much larger. We predict steady sales growth of +4% this next 12 months to USD284.7bn.
Cashflow
With higher sales, cashflow was stronger than expected at USD18.6bn in the 3Q excluding working capital, up from USD11.5bn in the 2Q. Cashflow has slowed slightly as investment spending has returned after previous gains. But using the recent average investment spending & combining with our sales, predicts a still strong average quarterly cashflow of USD17.3bn for this next 12 months.
Sales growth was a small positive +1% in the 3Q, USD64.7bn but 3% ahead of our forecast. Sales were up +8% from the 2Q which is slower than the normal double digits growth. Devices were +8% from the 2Q, services +11%, but device sales remain much larger. We predict steady sales growth of +4% this next 12 months to USD284.7bn.
Cashflow
With higher sales, cashflow was stronger than expected at USD18.6bn in the 3Q excluding working capital, up from USD11.5bn in the 2Q. Cashflow has slowed slightly as investment spending has returned after previous gains. But using the recent average investment spending & combining with our sales, predicts a still strong average quarterly cashflow of USD17.3bn for this next 12 months.
Sales growth, strong cashflow, high yield, rising payouts, higher target price...
Balance sheet
AAPL has been utilizing debt like most US companies im the last 5 years as rates have been so low. But net debt has started to decline & was lower at USD74.4bn in the 3Q from USD69.3bn in the 2Q. With our cashflow forecast & a USD56.2bn equity payout, net debt will reduce further to USD61.5bn in 12 months time.
Profit
While sales increased by +1%, net profit declined by -7%. This was because the cash cost ratio of net profit add back non cash costs minus sales as a % of sales has increased to 74%, perhaps reflecting growth of lower margin services. We use this same 74% to predict the next 12 months profit will rise +9% to USD62.5bn.
Value
AAPL has been paying out a large amount of capital since 2015, USD343bn up to the 3Q. The current market value of USD1,972bn is 5.8x capital paid, 6.9x sales, 6.4x assets, 27.5x equity with a 87% profitability & a 2.9% yield. Our cashflow forecast is USD69.2bn. At 1.6% with a 0.6X adjustment gives a revised higher target price of USD152.
AAPL has been utilizing debt like most US companies im the last 5 years as rates have been so low. But net debt has started to decline & was lower at USD74.4bn in the 3Q from USD69.3bn in the 2Q. With our cashflow forecast & a USD56.2bn equity payout, net debt will reduce further to USD61.5bn in 12 months time.
Profit
While sales increased by +1%, net profit declined by -7%. This was because the cash cost ratio of net profit add back non cash costs minus sales as a % of sales has increased to 74%, perhaps reflecting growth of lower margin services. We use this same 74% to predict the next 12 months profit will rise +9% to USD62.5bn.
Value
AAPL has been paying out a large amount of capital since 2015, USD343bn up to the 3Q. The current market value of USD1,972bn is 5.8x capital paid, 6.9x sales, 6.4x assets, 27.5x equity with a 87% profitability & a 2.9% yield. Our cashflow forecast is USD69.2bn. At 1.6% with a 0.6X adjustment gives a revised higher target price of USD152.
