Business Magazine

Why Apple is Worth More Than $550

Posted on the 21 June 2011 by Phil's Stock World @philstockworld


Why Apple is Worth More than $550
After dropping below its 200-day moving average today, we wanted to see just what Apple stock is worth. There are tons of opinions out there and many price targets, but its always good to do some of your own research and see what a company has to do to be worth a certain price. We are going to run a breakdown for you of Apple stock, and how we came up with a price target of more than $550 for the next twelve months.

For one, we first needed to project Apple’s operating income for the next five years including this year. We forecasted that the company will be able to produce just above $29B in operating income. We believe by 2015 the company should be able to produce $50B in operating income. This would be a growth rate of 72.5% in operating income over the next five years. From 2006 to 2010 (which included a recession), the company saw growth of 650% in operating income. While that type of growth is not possible, 70% is very moderate in expectations.

To figure out our price target, we also need to compute WACC, taxes, depreciation, growth in working capital, and capital expenditures. We configured the WACC at 8.65%, which we then use the present value factor of over the next five years. We saw working capital growing by $500M to $1.5B in the next five years. Depreciation growing from $1.7B to $2.7B over the next five years. Further, we saw capital expenditures growing to $5B by 2015. Overall, the company has an implied equity value of over 514M, which divided by shares outstanding rings up at $556.

Why Apple is Worth More than $550

Math not your forte. What we are proving to you though is that this PT is modest and safe. We all have heard the issues…Steve Jobs’ health and meaning to company. The Android taking over the iPhone (the iPhone is one product…Android more than 20). The ability for the company to continue to innovate could be hindered as they seem to have made every size i"whatever" and on and on. Overall, though, you are looking at a company that has become the #1 brand in the world. The company that sits on $11B cash and has no debt. Further, you are looking at a company that is severely undervalued.

We would be a buyer at these levels, on any drops, and as it rises to at least $400. The next five years may see a slowdown in the power of Apple’s growth, but that will not stop this stock.

Not keen on the price tag of Apple?

If Apple is still slated to grow by 70%+ in the next five years, a lot of their suppliers still have room to grow and success to be made. What companies may be better value plays than Apple (despite the value there):

LG Display (LPL) – The company supplies the touchscreen for the iPad 2 and other Applie products. The company could make $2.5B off of displays, and that would be 10% of the company’s total sales.

Broadcom (BRCM) – The company supplies Bluetooth and WiFi technology as well as touch screen controls. The company could make over $6B from Apple products.

TTM Technologies (TTMI) – The company supplies printed circuit boards. They are a smaller supplier, but they will do well from Ipad2 sales.

While investing is not as easy as just simple math…fundamentals are fundamentals. We can expect that this stock is going to rise. In order to be worth $315, the company would need to see 0 growth in the next five years…that’s right 0/none/nota growth in the next five years.

Want to bet on that?

Good Investing,

The Oxen Group

You Might Also Like :

Back to Featured Articles on Logo Paperblog

These articles might interest you :

  • Ellephantastic's New Venture..... Wall Murals...

    Ellephantastic's Venture..... Wall Murals...

    I now offer wall murals as part of my service. I can offer to Selby and surrounding areas up to 20-30 milesContact me for more details and a quoteHere's my firs... Read more

    The 23 July 2017 by   Ellephantastic
  • 4 Startup Survival Lessons Lead To Business Success

    Startup Survival Lessons Lead Business Success

    The good news is that the rate of new entrepreneurship leveled off a bit last year, although it is still rising, according to the latest Kauffman Index of... Read more

    The 23 July 2017 by   Martin Zwilling
  • Linda Moulton Howe - Gobekli Tepe - How's Your Katakana, Mate?

    Linda Moulton Howe Gobekli Tepe How's Your Katakana, Mate?

    the Katakana fontLinda Moulton Howe is renowned for her decades of dedicated research into UFOs and things of an esoteric nature, so what's this post about... Read more

    The 23 July 2017 by   Freeplanet
  • Can Conor Beat Floyd?

    Well, the simple answer is – yes, but it’s unlikely. Conor was beaten on the feet by Nate Diaz, who had him effectively out on his feet before Conor was forced... Read more

    The 23 July 2017 by   Geoff Griffiths
  • Itinerary and Expenses: 9 Days of Nerdiness in Kansai

    Itinerary Expenses: Days Nerdiness Kansai

    I'll tell you a secret. I fell in love sometime in my 10-day Japan trip in autumn of 2015. I had a quick love affair with Ainokura Village in Toyama Prefecture... Read more

    The 23 July 2017 by   Mustachio
  • The Pee Journey

    If you’re someone who has traveled long distances holding the urge to pee and hence, doubtful of drinking another gulp of water, you’ll probably understand... Read more

    The 23 July 2017 by   Sani09
  • Are Trouble Sleeping and Anger Common While Fasting?

    Trouble Sleeping Anger Common While Fasting?

    Have extremely obese patients been able to reach their ideal weight goals using fasting? Does drinking MCT oil speed up weight loss during fasting? And are... Read more

    The 23 July 2017 by   Dietdoctor

Paperblog Hot Topics