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Apple

Apple. STUDENT MANAGED INVESTMENT FUND Katherine Gonzalez Zachary Schwager Carlos Valcarcel Special Thanks to: John Neumann. Company Overview Product line-up Geographical Sales Apple 10 yr Stock chart Industry Overview Current Events Fundamental Analysis DuPont Analysis Market Share

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Apple

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  1. Apple STUDENT MANAGED INVESTMENT FUND Katherine Gonzalez Zachary Schwager Carlos Valcarcel Special Thanks to: John Neumann

  2. Company Overview • Product line-up • Geographical Sales • Apple 10 yr Stock chart • Industry Overview • Current Events • Fundamental Analysis • DuPont Analysis • Market Share • Pro Forma Income Statement • Relative Valuation • Absolute Valuation • Recommendations Agenda

  3. 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. Company Overview

  4. Computers • Cellular phones • MP3 players • Software • Online Music Vendor • Distributes third party computer Accessories • “Apple TV” an online television adapter Product line-up

  5. Revenue by Product

  6. The Company manages it business on a geographic basis. The operating segments consist of Americas, Europe, Japan, and Retail. Geographical Sales

  7. AAPL 10 Year Stock Chart

  8. 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. Industry Overview

  9. 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. Current Events

  10. Income/Cash Flow Sales Net Income Cash Flow from Operations

  11. Sales Growth

  12. Net Income Growth

  13. Cash Flow from Operations

  14. Operating Performance ROE ROA EBIT Net Profit Margin Asset Turnover

  15. ROE

  16. ROA

  17. EBIT

  18. Net Profit Margin

  19. Asset Turnover

  20. Short Term Liquidity Current Ratio Quick Ratio Receivables Turnover

  21. Current Ratio

  22. Quick Ratio

  23. Receivables Turnover

  24. Long-term Solvency

  25. 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. DuPont Analysis

  26. A comparison with Apple’s main competitors to establish it’s market-share in the industry Market Share

  27. Pro Forma Income Statement

  28. Pro Forma Income Statement cont .

  29. Relative Valuation

  30. Relative Valuation

  31. EPS (2008)1: $3.56 EPS (2008)2: $4.98 Current Price: $194.30 Relative Valuation

  32. Absolute Valuation FCFF Model

  33. Absolute Valuation - Cost Of Capital

  34. Absolute Valuation

  35. E(FCFF) = FCFF2007 * (1+g)t Absolute Valuation

  36. E(FCFF)2014 = FCFF20013 * (1+g) Absolute Valuation Terminal Value

  37. Absolute Valuation

  38. Recommendation Buy 100 Shares

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