Friday, April 22, 2011

Apple Target Price Reaffirmed at $370-$375 (Review) *Q1 historically worst quarter* AAPL


(Updated as of market close on Thursday, April 21, 2011)

Apple Stock Valuation

Apple News and Fundamentals Apple reported near-record revenues and net income for Q1 2011, which are reviewed and analyzed on this blog.. Current Apple financial data, charts, and review is at the Apple Financial Performance page, updated for the latest calendar Q1 2011 results reported on April 20, 2011. A review and analysis of the most recent Q1 2011 earnings call is posted at the Apple Earnings Conference Call page.

AAPL Earnings per Share Earnings per share for the past 4 quarters are $20.98. At the current, approximate AAPL closing price of $350.00 on April 22, 2011 this is a PE (ttm) of 16.68 and is lower than the normal PE (ttm) of 21+. Presumably the PE has decreased due to the medical leave of absence by Apple Co-Founder and CEO Steve Jobs, among other factors.

AAPL Cash Flow per Share Cash flow from operations for the past 4 quarters are $28.41. At the current AAPL closing price of $350.00, this is a cash flow multiple of 12.32, which is lower than the normal cash flow multiple of 15+. Presumably the cash flow multiple has decreased due to the medical leave of absence by Apple Co-Founder and CEO Steve Jobs, among other factors.

AAPL Valuation Price Q1 is historically the the worst quarter for Apple and a dip from the best quarter Q4 holiday sales. Apple's outlook for calendar Q2 2011 is an EPS of $5.03, which beats the prior year Q1 2010 EPS of $3.51 by 43%. Apple has set the bar high with the Q3 2010, Q4 2010, and Q1 2011 financial results. Assuming Apple can increase EPS by 10% in the future 12 months (4 quarters) compared to the trailing 12 months, this results in an estimated annualized EPS of $23.08 ($20.98 ttm X 1.10). At a PE of 20, this is a stock valuation and target of $461.56.

Steve Jobs Valuation Discount The market is discounting AAPL because of the medical leave of absence by Apple Co-Founder and CEO Steve Jobs. How much should Apple stock be discounted for this? 10%? 20%? 25%? Ultimately, we are assuming that the market will discount AAPL by no more than 20%. Therefore, our short-term stock valuation, and target, for AAPL is $369.25 (Normal target $461.56 X 80%). Any intermediate-term or long-term valuation, or target, of AAPL appears impossible because of the uncertainty over Steve Jobs. Further information is required which most likely will not be available based on past secrecy about the health and welfare of Steve Jobs.

Summary Therefore our stock valuation of Apple Inc., AAPL, is:
Short-Term (until Q2 2011 earnings report in mid-July): $369.25 or about $370 - $375
Intermediate-Term: No estimate
Long-Term: No estimate
Any additional news about the health of Steve Jobs will affect AAPL stock price.

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