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Apple[1]

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  • Katherine
  • katherine
  • Zack
  • Apple products include computers, cell-phone, mp3 players, software, online music vendor, etc DESKtop – 17% Laptop – 26% Ipod – 35% Put snazzy pie chart based on pro forma Apple computer share has gone from 2-3 % to 8% 2007 in the us So we can see the trend changing from – 2 years ago you would have to explain to your friends why your buying a mac, now you have to xplain to your friends why your buying a pc.
  • Katherine
  • zach
  • Zack
  • Carlos – over 120 million ipods sold since debut in 2001 Debut of 3G Iphone by Mid 2008 Pro at MacWorld in January. The strategy has paid off in a big way. Apple stores pulled in $1.25 billion in revenue in the company's last fiscal quarter, a 42 percent jump from a year earlier and accounting for a fifth of total revenue. Debut of Sub –portable MacBook Pro by Jan  expected to be 50% thinner than existing MacBook  Contains flash-based memory instead of disc drive New stores lighlight “Genius” Services Has paid off, Stores generate over $1.25 Billion in revenue last fiscal quarter (42% jump)
  • Katherine
  • katherine
  • Katherine
  • Katherine
  • Zack
  • Carlos
  • Current Ratio is the ability to pay back its short-term liabilities with its short-term assets
  • This ratio measures a company’s ability to meet short term obligations with its most liquid assets
  • Katherine
  • Carlos
  • Market Share - You should mention that apple is a pretty diverse company. Not every company is comparable to apple. you should be able to know what each company does and how each company relates to apple. How their market share directly reflects to apples market Ytd 2007- only represents the last 3 quarters of 2007, even though there fiscal year has ended. We wanted to remain consistent with all other companies. Katherine… if you have any questions on how to explain your slides.. Pease call or email us.. This is very important.
  • Combination of carlos and Zack These numbers are different then the market share numbers.. Because here we have include all 4 quarters of the fiscal year SGA- Service, general, administrative -in order to calculate cogs sold we had to calculate cost of goods sold as a percentage of revenue. We origionally calculated cogs as an average percentage of revenue. Which came out to 71.76, however we felt this was not representitive of the downward tred in cogs. As you can see 2006 to 2007 it decreaseed almost5%.
  • carlos
  • Price estimate based on a comparison ratio between our company and its competition and its index
  • K2= bond yeild + 3% uthendal K1= capm
  • Zack – Cost of Capital, , yield to maturity Free Cash Flow for firm –CARLOS E(FCFF) what we expect – Carlos
  • We just wanted to show at a small increase of 30% we can clearly see that apple is an undervalued stock. Since 30% is a very conservitive estimate when compaderd to the geomtric average of 147% we can see that apple is very undervalued. So a a likely tred continuing past 30% growth growth would only increase the amount of which apple is undervalued by.
  • Transcript

    • 1. Apple STUDENT MANAGED INVESTMENT FUND Katherine Gonzalez Zachary Schwager Carlos Valcarcel Special Thanks to: John Neumann
    • 2. Agenda
      • Company Overview
      • Product line-up
      • Geographical Sales
      • Apple 10 yr Stock chart
      • Industry Overview
      • Current Events
      • Fundamental Analysis
      • DuPont Analysis
      • Market Share
      • Pro Forma Income Statement
      • Relative Valuation
      • Absolute Valuation
      • Recommendations
    • 3. Company Overview
      • Apple Inc. was founded by Steve Jobs and Steve Wozniak in 1976.
      • Apple Computer, Inc., is an American multinational corporation with a focus on designing and manufacturing consumer electronics and closely related software products
      • As of September 2007, the company operates 194 retail stores in the United States, and more in the United Kingdom, Japan, Canada, and Italy
      • For a variety of reasons, ranging from its philosophy of comprehensive aesthetic design to their advertising campaigns, Apple has engendered a distinct reputation in the consumer electronics industry and has cultivated a customer base that is unusually devoted to the company and its brand, particularly in the United States.
    • 4. Product line-up
      • Computers
      • Cellular phones
      • MP3 players
      • Software
      • Online Music Vendor
      • Distributes third party computer Accessories
      • “ Apple TV” an online television adapter
    • 5. Revenue by Product
    • 6. Geographical Sales
      • The Company manages it business on a geographic basis. The operating segments consist of Americas, Europe, Japan, and Retail.
    • 7. AAPL 10 Year Stock Chart
    • 8. Industry Overview
      • Apple Inc. competes in the Technology Industry, Their focus is:
        • Computers
        • Cellular Phones
        • Online music
        • Software
        • Computer accessories
      • The Technology Industry is highly competitive and characterized by rapid technological advances in both hardware and software.
      • Because Apple participates in several components of the highly dynamic Technology Industry, Apple’s strategy has been to be an Innovator rather than a follower.
      • Apple’s Greatest competitor is the Microsoft Corporation.
    • 9. Current Events
      • Financial Results
        • Apple reported highest ever 4 th 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
      • Apple will also unveil a new sub-portable MacBook
        • The ultra-portable laptop is expected to be 50% thinner than the existing MacBook
        • Will contain flash-based memory instead of a disc drive.
      • New Apple store highlights "geniuses," services
        • Apple stores pulled in $1.25 billion in revenue in the company's last fiscal quarter
        • 42% jump from a year earlier and accounting for a fifth of total revenue.
    • 10. Income/Cash Flow Sales Net Income Cash Flow from Operations
    • 11. Sales Growth
    • 12. Net Income Growth
    • 13. Cash Flow from Operations
    • 14. Operating Performance ROE ROA EBIT Net Profit Margin Asset Turnover
    • 15. ROE
    • 16. ROA
    • 17. EBIT
    • 18. Net Profit Margin
    • 19. Asset Turnover
    • 20. Short Term Liquidity Current Ratio Quick Ratio Receivables Turnover
    • 21. Current Ratio
    • 22. Quick Ratio
    • 23. Receivables Turnover
    • 24. Long-term Solvency
    • 25. DuPont Analysis Decompose ROE into its components (Asset Turnover, Net Profit Margin, Financial Leverage) in order to analyze what might be trying to change ROE. Net Profit Margin Has significantly been increasing and affecting ROE.
    • 26. Market Share
      • A comparison with Apple’s main competitors to establish it’s market-share in the industry
    • 27. Pro Forma Income Statement Industry Revenues ---------------------> 379,580.90   307,620.00   461,917.00   2006   2007   2008 Market Share 5.09%   7.80%   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%   Other Music Related products & Services 1,885.0 9.76% 2,496.0 10.40%   Iphone & Related products and Serivces -   123.0 0.51%   Peripherals & other hardware 1,100.0 5.70% 1,260.0 5.25%   Software, service, and other net sales 1,279.0 6.62% 1,508.0 6.28%   Total Net Revenue 19,315.0 100.00% 24,006.0 100.00% 30,045.0 Total COGS 13,717.00   15,852.00   21,559.95 GROSS PROFIT 5,598.00   8,154.00   8,485.05 Gross Profit Margin 28.98%   33.97%     Total COGS as % of Rev 71.02%   66.03%   71.76% SGA, Operating Expenses 3,145.0   3,745.0   4,482.71 Op Exp as % of Revenue 16.28%   15.60%   14.92% OPERATING INCOME $2,453.00   $4,409.00   4,002.33
    • 28. Pro Forma Income Statement cont . Unusual Item         0 OPERATING Inc After Unusual Item $2,453.00   $4,409.00   4,002.33 OTHER INCOME (EXPENSE)           Interest Income 394.0   647   657.5624 Interest Expense 0.0   0.0   0.0 Net Interest Income ( Expense ) 394.0   647.0   657.6 Gain on sales of prop/equip 0.0   0.0   0 Other Income (Expense) Net 29.0   48.0   48.0 EBT $2,818.00   $5,008.00   4,611.90 Income Taxes $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 Realized Tax Rates: 29.42%   30.19%   30.05%
    • 29. Relative Valuation
    • 30. Relative Valuation
    • 31. Relative Valuation
    • 32. Absolute Valuation FCFF Model
    • 33. Absolute Valuation - Cost Of Capital
    • 34. Absolute Valuation
    • 35. Absolute Valuation E(FCFF) = FCFF 2007 * (1+g) t
    • 36. Absolute Valuation Terminal Value E(FCFF) 2014 = FCFF 20013 * (1+g)
    • 37. Absolute Valuation
    • 38. Recommendation Buy 100 Shares