Apple Inc (AAPL) has been one of the hottest stocks on the market for awhile now. It seems like I can hardly leave the house, let alone start the computer, without hearing or seeing something about Apple. In this article, I’m going to briefly talk about some recent history with this tech giant, as well as discuss where the company currently stands and some more upcoming greatness.
Apple Inc is a multinational company that designs, manufactures and markets smartphones, tablet devices, computers and portable digital media players. The company also sells a variety of related software, services and networking solutions.
Key historical dates
1976: Apple Computer Company is founded by Steve Jobs and Stephen Wozniak on April Fool’s Day.
1980: Apple goes public, marking the largest IPO since Ford went public in 1956. Apple debuts with a valuation of $1.8 billion with 1,000 employees.
1981: IBM (IBM, Financial) introduces the PC ($1,565).
1983: John Sculley, president of Pepsi-Cola, becomes president and CEO of Apple.
1984: The original Macintosh is introduced ($2,495).
1985: Steve Jobs resigns from Apple after a confrontation with Sculley and starts his own company: NeXT.
1988: Computers are becoming increasingly popular, and NeXT introduces a new 12-in computer that blows Apple’s recent hardware away.
1996: New CEO Gilbert Amelio halts new operating system project in order to buy NeXT Software from Steve Jobs.
1997: Jobs, brought on as an advisor following the NeXT purchase, becomes interim CEO after the removal of Amelio.
2000: Jobs becomes CEO.
2001: First iPod ships.
2005: Apple announces that future Macs will use CPUs from Intel.
2007: iPhone introduced.
2011: Steve Jobs passes away, and Tim Cook named new Apple CEO.
Since 1998 Apple has acquired 61 different businesses. The most recent being the subscription streaming music service Beats Music and Beats Electronics, which produces headphones, speakers, and audio software for a total of $3 billion.
Financial strength
Apple has an average Revenue Growth of 38.1% over the last 10 years and Free Cash Flow Growth of 55.7%.
AAPL data by http://www.gurufocus.com">GuruFocus.com
The company’s iPhone directly accounted for more than half of fiscal 2013 revenues with over 150 million units sold. Apple also sold over 125 million units in fiscal 2011, accounting for 50% of revenues. This has definitely been Apple’s fastest growing segment over the last several years with substantial future opportunities in international, enterprise, and educational markets.
Since April of 2010, the Apple iPad has become the best-selling tablet computer by far. Prior to the introduction of the iPad, sales for similar computing devices were less than 200,000 units. Conversely, in fiscal 2010 (iPad’s initial release), the company sold over 7 million iPads accounting for 8% of revenues. Moreover, in fiscal year 2013, more than 71 million iPads were sold summing to a whopping 19% of revenues.
Sales of Apple’s computers, known as Macs, made up only 13% of revenues in fiscal 2013. Notably, Mac unit sales have grown much faster than what has been reported for PC sales.
In addition, the data below speaks for itself. Take note of the total assets versus total liabilities, as well as the drastic increase in revenues over time.
In 2012, Apple’s Board of Directors authorized a program to repurchase up to $10 billion of common stock beginning in 2013. However, in April of 2013, the board of directors increased the program to authorize $60 in repurchases instead. This decision was made after an April 2013 announcement of the company’s desire to significantly expand its program to return capital to shareholders. Not only did this include the increase in share repurchases, but also a raise in the quarterly dividend. During 2013 the company utilized a total of $23 billion to repurchase common shares.
The below data shows the results of a hypothetical $100 invested in either Apple or various indexes on 9/30/2008 including reinvestment of dividends.
Management
After becoming the chief operating officer for Apple in 2007, Tim Cook became the chief executive officer in 2011 after Jobs resigned due to health. Cook has a very hands-on approach and was the first to launch a massive share repurchase program after it had been long ignored by Jobs. Cook has also been making many more acquisitions than were made during the Jobs era.
Based on the company’s philosophy, the executive compensation program is quite simple and based entirely on performance:
Valuation
Utilizing the conventional P/E method we can subtract the company’s $13 billion in cash from the $604 billion market cap to discover that the company’s operations can actually be purchased for $591 billion. Net income of $38.5 billion means that the company is currently trading at a P/E of 15.35, which is just slightly under the current P/E of 16.3.
We can also look at the Peter Lynch value of the stock which is currently valued at $154.75 according to GuruFocus.com, and viewing the Peter Lynch chart shows the current trend.
For the last two fiscal years AAPL has generated Free Cash Flow amounts over $40 billion. With a 5-year track record of 50% average growth in Free Cash Flow we can only assume that this will continue to increase.
By looking at the GuruFocus.com’s DCF Calculator for AAPL we can see that the estimated fair value price for the company is $176.22 per share. This currently gives investors a 43% Margin of Safety, which is more than adequate in most value investor’s eyes.
End notes
Disclosure: No current position held at the time of writing.
Disclaimer: The opinions and ideas in this article are for informational and educational purposes only. They are not a recommendation to buy or sell any stock at any given time. As always, it is imperative for each individual investor to do their own due diligence and perform their own research on any and all stocks before making an investment decision.
