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The on-going turmoil in the markets and analysts lowering estimates across the technology sector has had a big impact on Apple’s (NASDAQ: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 valuation model of AAPL with interactive assumptions

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).

Assumptions

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.

Source: Running The Numbers – Apple Looks Cheap