Below US$150 a share Apple (AAPL) looks a buy
With the release of Apple’s (AAPL) latest quarterly results the share price headed to the US$150 a share range in after-hours trading. Valuecruncher did a valuation for Apple in early June that put a base case valuation on AAPL of US$146.70 – 21% below the then share price of US$186.10. With AAPL moving into the range of our previous valuation – we decided to review our valuation using the Valuecruncher on-line valuation tool.
Apple (AAPL) Valuation Assumptions
Our assumptions are revenues of US$32.8 billion in 2008 growing to US$50.0 billion in 2010. We have used a flat EBITDA margin of 21% from 2008. We used a terminal growth rate of 5.75%. We used a terminal capital expenditure number of US$1.0 billion. We have used a WACC (discount rate) of 11.0%.
Our valuation comes out at US$149.75 per share. This is in-line with the current share price.
Our analysis incorporates the cash on the Apple balance sheet – Valuecruncher calculates a net debt number.
Apple is a great company with incredibly innovative products that consumers all around the world want desperately. That is a position that must be envied by all their competitors in the technology space and beyond.
Warren Buffett’s famous quote is “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”. At around US$150 a share – in our view Apple fits that criteria. Play with our assumptions – what does your analysis say?