The on-going turmoil in the markets and analysts lowering estimates across the technology sector has had a big impact on Apple’s (AAPL) share price. AAPL finished at US$131.05 on the 22 September 2008 – 35% below the 52 week high of US$202.96. We decided to look at the underlying numbers for AAPL using the Valuecruncher on-line valuation model to see where we place the current share price.
Valuecruncher produces a valuation of US$163.98 for AAPL. This is a current valuation not a target price. This valuation is 25% above the current share price of US$131.05 (note our model picks up an earlier price of US$140.91 because we completed the valuation earlier).
Our assumptions are revenues of US$32.5 billion in 2008 growing to US$50.0 billion in 2010. We have used an EBITDA margin of 20.5% in 2008 dropping to 19.5% in 2010. We used a terminal growth rate of 5.75%. We used a terminal capital expenditure number of US$1.25 billion. We have used a WACC (discount rate) of 10.0%. All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Our analysis incorporates the cash on the Apple balance sheet – Valuecruncher calculates a net debt number.
Based on our analysis the current share price looks cheap. Play with our assumptions – what does your analysis say?
Stock position: None.