APPLE

Accounting Analysis- Apple



Accounting Analysis-Apple

Introduction

Apple Inc. (Apple or "the company") is engaged in design, development and marketing of personal computers, media devices, and portable digital music players. The company also sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The company primarily operates in the US. It is headquartered in Cupertino, California and employed 63,300 people by the end of September 1, 2011 of which 60,400 are employed full time. The company recorded revenues of $108,249 million during the fiscal year ended September 2011 (FY2011), an increase of 66% over FY2010. The operating profit of the company was $33,790 million during FY2011, an increase of 83.8% over FY2010. The net profit was $25,922 million in FY2011, an increase of 85% over (www.sec.gov).

Valuation Report

We are raising our fair value estimate to $770 per share from $670, based on improved long-term growth assumptions. This fair value estimate implies fiscal 2013 (ending September 2013) price/earnings of 15 times, enterprise value/EBITDA of 11 times, and a 6.5% free cash flow yield. Given the success of the iPhone 4S, iPad 2 and "new iPad" to date, we project 45% revenue growth in fiscal 2012. We expect Apple's momentum to continue in the near to intermediate term and project 21% sales growth in fiscal 2013 and 17% in 2014.

Despite the iPhone's huge success thus far, according to Gartner data, unit sales make up less than 25% of smart phone shipments and less than 10% of total handsets today, so Apple still has a mammoth opportunity to recognize strong iPhone growth. We expect the Smartphone market to essentially double over the next five years, and we hold our forecast of the iPhone's share of the market relatively constant in the low to mid-20s, as Apple gains share on the ...