Apple STUDENT MANAGED INVESTMENT FUND Katherine Gonzalez Zachary Schwager Carlos Valcarcel Special...
Transcript of Apple STUDENT MANAGED INVESTMENT FUND Katherine Gonzalez Zachary Schwager Carlos Valcarcel Special...
AppleAppleSTUDENT MANAGED INVESTMENT FUND
Katherine GonzalezZachary Schwager Carlos Valcarcel
Special Thanks to: John Neumann
AgendaAgenda
I. Company OverviewII. Product line-upIII. Geographical SalesIV. Apple 10 yr Stock chartV. Industry OverviewVI. Current EventsVII. Fundamental AnalysisVIII. DuPont AnalysisIX. Market ShareX. Pro Forma Income StatementXI. Relative ValuationXII. Absolute ValuationXIII. Recommendations
Company OverviewCompany 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.
Product line-upProduct line-up
ComputersCellular phonesMP3 playersSoftwareOnline Music VendorDistributes third party computer
Accessories “Apple TV” an online television adapter
Revenue by ProductRevenue by Product
Geographical SalesGeographical Sales
The Company manages it business on a geographic basis. The operating segments consist of Americas, Europe, Japan, and Retail.
AAPL 10 Year Stock ChartAAPL 10 Year Stock Chart
Industry OverviewIndustry 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.
Current EventsCurrent Events
Financial Results◦ Apple reported highest ever 4th 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.
Income/Cash FlowIncome/Cash FlowSales
Net IncomeCash Flow from Operations
Sales GrowthSales Growth
Net Income GrowthNet Income Growth
Cash Flow from OperationsCash Flow from Operations
Operating PerformanceOperating PerformanceROEROAEBIT
Net Profit MarginAsset Turnover
ROE ROE
ROAROA
EBITEBIT
Net Profit MarginNet Profit Margin
Asset TurnoverAsset Turnover
Short Term LiquidityShort Term LiquidityCurrent Ratio
Quick RatioReceivables Turnover
Current RatioCurrent Ratio
Quick RatioQuick Ratio
Receivables TurnoverReceivables Turnover
Long-term SolvencyLong-term Solvency
DuPont AnalysisDuPont 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.
Market ShareMarket ShareA comparison with Apple’s main A comparison with Apple’s main
competitors to establish it’s competitors to establish it’s market-share in the industrymarket-share in the industry
Pro Forma Income StatementPro Forma Income Statement
Industry Revenues ---------------------> 379,580.90 307,620.00 461,917.00
2006 2007 2008Market 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
Pro Forma Income Statement cont .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%
Relative ValuationRelative Valuation
Relative ValuationRelative Valuation
Relative ValuationRelative Valuation
Absolute ValuationAbsolute ValuationFCFF Model
Absolute Valuation Absolute Valuation - Cost Of Capital - Cost Of Capital
Absolute ValuationAbsolute Valuation
Absolute ValuationAbsolute Valuation
E(FCFF) = FCFF2007 * (1+g)t
Absolute Valuation Absolute Valuation Terminal ValueTerminal Value
E(FCFF)2014 = FCFF20013 * (1+g)
Absolute ValuationAbsolute Valuation
RecommendationRecommendationBuy 100 Shares