4thQuarterly report, 2017, for Apple (AAPL)Date:February9, 2018
Percentage change in Sales from year ago quarter__12.7%_
Percentage change in Earnings per Share from year ago quarter 15.8%
Is company meeting our target sales & earnings estimates? Yes
Pre-tax Profit on sales trend? (up, even, down) DOWN
Return on equity trends? (up, even, down) UP
Debt? (up, even, down)UP
Current PE is 16.1.
Where does it fall in my estimated High/low range of PE's? __on the high end of high__
Signature PE =15
Club cost basis for this stock is$48.7109. Current price is $156.41 (02/09/18) (closing price)
Current fair value: Morningstar:$170.00 S&P:$169.30Value Line: $195-$260
My SSG Total Return is ___11.7%__ Projected Average Return is ___7.5%___
What will drive future growth?
Apple sold 77 million iPhones in the December quarter, down 1% from last year. Yet the bigger story is the 15% year-over-year rise in ASPs, thanks to a favorable mix shift to the iPhone X, which was Apple’s best-selling phone out of its product lineup upon launch. In turn, iPhone revenue rose 13% year over year to $61.6 billion. The biggest stunner was Apple disclosing its intentions to run its business on a net cash-neutral basis, as new U.S. tax laws now give Apple the flexibility to bring its overseas cash into the U.S. to pay out dividends and stock buybacks. This is a far less conservative stance than Apple’s historical attitude to capital allocation. In light of new tax laws, given the firm’s whopping $163 billion of net cash today and high likelihood of strong free cash flow generation going forward, Morningstar can easily foresee Apple doubling its annual dividend and share repurchases over the next five years. We are raising our fair value estimate for narrow-moat Apple to $170 from $163, mainly due to a lower-than-expected ongoing tax rate (forecast to be 15% in fiscal2018). Shares appear fairly valued to us. We view Apple as well positioned to develop and expand enough services to enhance the userexperience, in order to build switching costs that will help the firm retain customersand generate significant repeat purchases will be critical for future iPhone growth inthe years ahead. We consider almost all other products and services that Apple offers(Apple Watch, iCloud, HomePod, AirPods, Apple Pay) as not only incremental revenueand earnings drivers for the firm, but as (more importantly) improving the iOSecosystem that will enable Apple to sell future iPhones at premium prices to a loyalcustomer base.
4 star S&P buy with medium risk. They project 14% revenue growth for FY 18 (Sep.) and a 5.0% increase for FY 19, following a 6.3% rise for FY 17. Anticipate iPhone sales rising in FY 18 and FY 19 as consumers upgrade to devices with higher average selling prices that possess more content (e.g. OLED displays, facial recognition and wireless charging). They are encouraged by a recent growth in Services, up 18% in the December quarter, led by the App store and iCloud. They positively view recent Mac/iPad trends but are wary of sustainability. Other hardware offerings (e.g. Watch, AirPods and HomePod) contributing to growth.
Value Line looks for share earnings to jump over 20% in fiscal 2018, to $11.10, and to reach $17.50 by early next decade. Given these projections, VL still likes as a core long term holding, one suitable for most accounts.The shares are currently top ranked (1) for Timeliness, too.
Additional comments:
Recommend: Buy More ____, Hold____, Challenge with better investment______, Sell___
shows as a buy…currently 6.4% of portfolio let club decide