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APPLE STOCK ANALYSIS (AAPL): Buy Now or Wait for Dip? Intrinsic Value Calculation! - YouTube
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hi everyone this viktor here in this
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video i'm going to analyze apple stock
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to see if it's still a great complete
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for long-term investing at the time of
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making this video apple stock is near 3
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trillion in market cap it's the largest
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company in the world by market cap apple
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stock performed exceptionally well in
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the past five years it outperformed the
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s p function index by a large margin in
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the past five years because of apple's
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great products and services increasing
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earnings dividend payouts and large
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share buybacks i actually made a stock
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analysis video about apple about one
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year ago since then apple stock has
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increased 62 percent while the s p 500
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increased 45 during this period
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obviously past performance does not
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guarantee future results so in this
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video i will analyze apple stock to see
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if it's still a great company for
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long-term investing i will talk about
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these topics in this video first apple's
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business overview second apple's three
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major long-term growth catalysts third
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apple's three biggest risks you must
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know fourth apple stock valuation you
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learn about apple's fair interest rate
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per share and feed will i buy apple
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stock if you like this video make sure
[67]
to hit the like button subscribe and
[68]
turn on the notification button i will
[70]
continue to make many excellent stock
[73]
analysis and investing videos a week
[75]
that will help you become a great
[76]
investor also if you like this channel
[78]
and want to support it check out my
[80]
patreon blog in the video description
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and become a premium member our goal is
[85]
to help all our members grow their stock
[86]
portfolios to overselling figures over
[89]
time with your support we'll be able to
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stay independent hire other outstanding
[93]
analysts to cover different stocks and
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create many excellent stock analysis and
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investing videos a week that will help
[99]
you become a great investor the link is
[101]
in the video description take a look
[103]
let's start
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before investing in any stocks i believe
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it's important to understand the
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business first so how does apple earn
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its revenues apple's business is very
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easy to understand if you already use
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apple products apple's most important
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products are iphone mac ipad apple watch
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airpods ios app store and icloud this is
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from the most recent financial report
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that ended on september 25 2021 if you
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look at this next sales by category you
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can see most of apple's sales came from
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iphone and services apple also earns
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large revenues from mac ipad wearables
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and accessories as of now there are over
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1 billion active iphone users in the
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world in comparison according to this
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website there are approximately 6.64
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billion smartphone users in the world in
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2022 if you look at this here in fiscal
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2021 you can see apple had the largest
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sales in north america europe and
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greater china these are the three most
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important markets for apple apple is the
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most profitable company in the world the
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company earns a large amount of revenue
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operating income and free cash flow
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every quarter this is from morningstar
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you can see apple had very consistent
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revealing growth operating income growth
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operating cash flow growth and free cash
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flow growth in the past three years
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dream the pedemic in 2020 apple was able
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to grow its family and operating income
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even though apple had to close most
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stores temporarily in my opinion this
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shows apple has a very resilient
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business model that can protect itself
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from most specimics and recessions in
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terms of financials apple had
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190.5 billion of cash and marketable
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securities in the most recent quarter
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ended on september 25th 2021 according
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to management apple had 125 billion of
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total debt in the most recent quarter
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apple's 190.5 billion of cash and
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marketable securities was more than
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enough to pay off apple's total debt
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here's an important point you want to
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know one of apple's long-term goals is
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to reach net cash neutral over time this
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means apple will aim to have an equal
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amount of cash and debt so they will
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balance out to zero apple is planning to
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have its cash position be about the same
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as its total debt over time if apple has
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more cash than its total debt apple will
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return the extra cash to shareholders
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through dividends and share buybacks
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every quarter this is from the most
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recent earnings call let me now turn to
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our cash position we ended the quarter
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with 191 billion in cash plus marketable
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securities we issued 6.5 billion of new
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term debt retired 1.3 billion of term
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debts and it decreased commercial paper
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by 2 billion leaving us with total debt
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of 125 billion as a result net cash was
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66 billion at the end of the quarter as
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we continue to make progress start our
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goal of net cash neutral over time as
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our business continues to generate very
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strong cash flow we were also able to
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return 24 billion to shareholders during
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the september quarter this included 3.6
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billion in dividends and equivalents and
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20 billion through open market
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repurchase of 137 million apple shares
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when it comes to investing it's
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important to be four looking so let's
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talk about apple's long-term growth
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catalyst first before we talk about
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apple's risk and stock valuation i
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believe apple's most important long-term
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growth catalyst will still be its
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existing product categories apple is a
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product driven company apple's most
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important products are iphone mac ipad
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apple watch airpods and the app store
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these products drive the most sales for
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apple every quarter here's the important
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part apple does not need to release
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revolutionary products every year or
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every two to three years like before
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apple's main strategy now is to reduce
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incremental upgrades across all its main
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product categories every year apple
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tends to release new product designs and
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major upgrades for all main products
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every three to four years if you are an
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iphone user you will notice that apple
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tends to keep its iphone design the same
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for around 3 years apple improves
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iphone's internal specs incrementally
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every year and releases a new iphone
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design every three to four years for
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example the iphone 13 pro max design is
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almost the same as last year's iphone 12
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pro's design the only major differences
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are the internal specs such as its a15
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bionic chip the iphone promotion screen
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and much more improved cameras according
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to rumors the upcoming iphone 14 pro
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will feature almost the same design as
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the iphone 13 pro the iphone 14 pro will
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likely have a hole punch display design
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to replace the current camera notch of
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course the iphone 14 pro's internal
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specs will be better than the iphone 13
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pro's internal specs apple's current
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incremental upgrade strategy still works
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very well for apple because most
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consumers still upgrade their iphones
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their ipads max apple watch and airpods
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every three to four years apple did not
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release any revolutionary products in
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2021 it still had record revenues and
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record sales across all product
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categories in the most recent q4 2021
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quarter despite apple experienced larger
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than expected supply constraints i
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believe apple's biggest competitive
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advantage is its ios ecosystem based on
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my experience i noticed that it's very
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hard for most people to leave apple's
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ecosystem once they start using many
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apple products for example if you use
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iphone ipad imessage and ios apps every
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day it will be very hard for you to
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switch to an android phone or an android
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tablet if you have many friends and
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family members who use iphone and
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imessage you will likely want to use an
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iphone instead of an android phone in my
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opinion apple's ios ecosystem is apple's
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biggest competitive advantage and
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economic mode because most consumers
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want to stay within apple's ios
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ecosystem once they are used to using
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many apple products such as iphone ipad
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mac airpods and apple watch also i
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believe iphone will continue to be the
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most important product going forward
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unless it's replaced by another product
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category such as the upcoming apple ar
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glasses iphone generates the most sales
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for apple more importantly iphone is a
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very sticky product that can bring more
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new users to apple's ios ecosystem many
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iphone users tend to buy other apple
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products such as mac ipad and apps once
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they start using iphones here is another
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important point in recent years apple
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has become a subscription-based business
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as of now apple has over 1 billion
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active iphone users in comparison there
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are approximately 6.64 billion
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smartphone users in 2022 in the most
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recent earnings call management this
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about apple's paid subscriber growth
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paid subscriptions continue to show very
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strong growth we now have more than 745
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million paid subscriptions across the
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services on our platform which is up
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more than 100 million from last year and
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nearly five times the number of paid
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subscriptions we had less than 5 years
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ago apple's subscription-based services
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include apple arcade apple music apple
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news plus and apple tv plus icloud
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storage plan is also subscription based
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as of now apple service has generated
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the second most revenue for apple
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apple's services include icloud apple
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pay apple car app store and
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subscription-based services i mentioned
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earlier the app store generates the most
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service revenue for apple going forward
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i expect apple services will continue to
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be a large revenue driver for apple
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because many iphone and ipad users tend
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to buy many apps on the app store and
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use other services such as icloud
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storage plan i believe apple's second
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long-term growth catalyst is apple's new
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product categories as of now apple is
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expected to release its augmented
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reality ar and virtual reality vr
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headset in 2022 or later in 2023. we
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will call these apple ar glasses i
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believe apple's upcoming air classes
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will eventually become a large revenue
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driver for apple is similar to the apple
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watch in my opinion air glasses are the
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next biggest thing after the iphone
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apple air glasses may eventually replace
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the iphone or work as an accessory
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similar to the apple watch if apple air
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glasses succeed it will become another
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revenue driver for apple in addition to
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iphone mac ipad apple watch airpods and
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app store that's generally the most
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sales for apple here's another new
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product category apple is rumored to
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release its autonomous driving electric
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vehicle ev which will have full
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self-driving capabilities the car is
[578]
expected to target consumers this means
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apple will compete directly with tesla
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if apple releases its own ev according
[584]
to mac rumors.com apple endless michigan
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believes it will be 2025 to 2027 at the
[590]
earliest before and apple card is ready
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for launch if apple does release its own
[593]
eevee i believe it will be way hard for
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apple to compete with tesla because
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tesla's evtec manufacturing processes
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and new networks are already far ahead
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of other ev makers i beat apple's third
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long-term growth catalyst is its share
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buybacks every year one of apple's
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long-term goals is to reach net cash
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neutral meaning apple intends to have
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the same amount of cash as its total
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debt each year if apple has extra cash
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that's not needed for operations and
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paybacks apple will return the extra
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cash to shareholders by paying more
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dividends and buying back more shares
[622]
each year in my opinion apple's net cash
[624]
neutral gold actually benefits long-term
[626]
shareholders because it decreases apple
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shares outstanding substantially over
[630]
time for example even if apple's revenue
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and net income are not growing as fast
[634]
as before apple's earnings per share eps
[637]
can still grow at a faster rate than its
[639]
net income growth each year because
[641]
apple is continually buying back more
[643]
shares and therefore reducing the number
[645]
of shares outstanding in addition to
[647]
share buybacks apple will likely
[648]
increase its dividend over time to meet
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its net cash neutral goal i believe this
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is one of the biggest reasons warren
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buffett bought 5 ownership or 36 billion
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of apple shares between 2016 and 2018.
[660]
warren buffett's 36 billion investment
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in apple is now worth 160 billion at the
[665]
time of making this video in terms of
[667]
risk ib apple's biggest certain risk is
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antitrust issues specifically apple's
[671]
app store as of now apple charged as
[673]
much as 30 commission fees across all
[676]
app purchase and in-app digital content
[678]
purchase for software developers that
[680]
earn more than 1 million in app sales
[682]
each year according to cnbc apple will
[684]
charge 15 commission fees for software
[687]
developers that earn less than 1 million
[689]
in app sales each year but here's the
[691]
important part apple requires all
[693]
developers to use apple's in app payment
[695]
system instead of using outside payment
[697]
systems this means almost all the app
[699]
developers need to pay apple as much as
[701]
30 commission fees for all their app
[703]
revenues if they want to publish their
[705]
apps on the apple app store apple has
[706]
kicked fortnite off the app store
[708]
because epic games the maker of fortnite
[710]
tried to use its own payment system
[712]
instead of using apple's in-app payment
[714]
system in order to avoid apple's 30
[717]
commission fee if u.s regulators force
[719]
apple to allow developers to use other
[721]
payment systems instead of apple's
[723]
in-app payment system this will impact
[725]
apple's app store revenue personally i
[727]
believe this chance of happening is low
[729]
this is from the wall street journal
[731]
apple on wednesday won a u.s appeals
[733]
court reprieve in rolling out changes to
[736]
the app store ordered by a federal judge
[738]
as part of the big tech company's
[739]
anti-trust battle with epic games the
[741]
ninth u.s circuit court of appeals
[743]
granted the iphone maker's request to
[745]
delay implementation of a federal judge
[748]
order to force apple to allow developers
[750]
to communicate with users inside their
[752]
apps about alternative payment methods
[754]
outside of the app store the order means
[756]
apple will be able to delay perhaps for
[759]
years putting in place some of the most
[761]
significant changes ever to how it
[762]
operates its lucrative app store as the
[764]
company and apple seed broader appeals
[767]
the second biggest risk is competition
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the smartphone market is a duopoly
[771]
between apple ios and alphabet's android
[773]
os android os has a much larger lower
[776]
market share than ios because android os
[778]
is free for manufacturers such as
[780]
samsung and xiaomi to use also iphones
[783]
tend to be more expensive than most
[785]
android phones in many developing
[786]
countries such as india most people use
[788]
android phones because android phones
[790]
tend to be much cheaper according to
[792]
this website android os had a market
[794]
share of 17 while ios had the market
[797]
share of 29 in december 2021. apple's
[800]
upcoming air goddesses will compete with
[801]
meta's quest headset and mantas upcoming
[803]
air glasses as of now meta's quest
[806]
headset and ecosystem are far and health
[808]
competitors at the time making this
[809]
video meta's quest headset is the only
[812]
mobile and standalone vr headset that
[813]
also has a very large ecosystem if apple
[816]
does release its full self-driving ev
[818]
apple will compete directly with tesla
[820]
again i believe it will be way hard for
[821]
apple to compete with tesla in evs
[823]
because tesla's ev tech and
[824]
manufacturing processes are far ahead of
[827]
all the ev makers the third biggest risk
[829]
is the current supply chain issues that
[830]
are affecting all major tech companies
[832]
including apple this is from the most
[833]
recent earnings call if you look at q4
[836]
for a moment we had about six building
[838]
supply constraints and infected the
[840]
iphone the ipad and the mac there were
[842]
two causes of them for q4 one was the
[844]
chip shortage that you have heard a lot
[846]
about from many different companies
[847]
through the industry and the second was
[849]
covert related manufacturing disruptions
[851]
in southeast asia the second of those
[853]
the culvert disruptions have improved
[855]
materially across october to where we
[857]
currently are and so for this quarter we
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think that the primary cause of supply
[861]
chain related shortage will be the chip
[863]
shortage is affecting i should say
[865]
pretty much most of our products
[867]
currently but from a demand point of
[868]
view demand is very robust and so part
[871]
of this is that the man also is very
[872]
strong but we believe that by the time
[874]
we finish the quarter that the
[875]
constraints will be larger than the 6
[877]
billion that we experienced in q4 if the
[879]
current supply chain uses and chip
[881]
shortage continue longer than expected
[883]
it will reduce apple's iphone mac and
[886]
ipad sales in the upcoming quarters
[888]
personally ibf will take the current
[889]
supply chain users and chip shortage
[891]
around the world at least two years to
[893]
return to normal let's talk about apple
[894]
stock variation i always use this
[896]
interest rate calculator to calculate
[898]
the stock's fair interest value so i
[899]
will know whether the stock is over
[901]
while you fairly value or undervalue if
[903]
you want this intrinsic value calculator
[905]
you can download it in my patreon blog
[906]
in the video description these are the
[908]
key assumptions first i define apple's
[910]
intricate value as its future cash flows
[912]
discounted to the present day the
[914]
discount rate is eight percent this is
[916]
slightly higher than the 7.6 cost of
[918]
equity calculated by feedbooks.com you
[920]
can always use a higher discount rate
[922]
here if you want to be more conservative
[924]
apple's most recent 12 months of free
[926]
cash flow is 92.95 billion based on the
[929]
long-term growth catalyst i talked about
[930]
earlier i believe apple's free cash flow
[932]
will grow at compound and you'll go
[934]
through a ca drop between 5 and 15 over
[937]
the next five years to calculate the
[938]
terminal value at the end of year 5
[940]
we're using both the perpetual growth
[942]
model and the except multiple model here
[943]
then we take the areas of both models to
[945]
calculate the terminal value let's go
[947]
over these three case scenarios the
[949]
worst case the normal case and the best
[951]
case scenarios under the worst case
[952]
scenario we're using compound and you go
[954]
through a cagr of five percent if we
[957]
forecast apple's free cash flow to the
[958]
next five years and discount the free
[960]
castle to the present day apple's
[961]
interest rate should be around 1.97
[964]
trillion for the entire company or 120
[966]
per share i'm giving this scenario a 25
[968]
probability here under the normal case
[970]
scenario we're using a compound and you
[972]
go through a cage of 10 if we forecast
[975]
apple's free castle to the next five
[976]
years and discount the free cash flow to
[978]
the present day apple's interest rates
[980]
around 2.43 trillion for the entire
[982]
company or 149 per share i'm giving this
[985]
scenario of 50 probability here under
[987]
the best case scenario we're using a
[989]
compound annual growth rate of 15
[991]
if we forecast apple's free cash flow to
[993]
the next five years and discount the
[994]
free cash flow to the present day
[996]
apple's interest rates should be around
[998]
2.99 trillion for the entire company or
[1000]
183 dollars per share i'm giving this
[1002]
scenario a 25 probability here if we add
[1005]
all these numbers here apple's very
[1007]
interest rate you should buy 150 per
[1009]
share this means apple stock is
[1010]
overwhelmed at the top making this video
[1012]
in comparison morningstar estimates the
[1014]
apple's favorite to be much lower at
[1016]
around 124 per share so will i buy apple
[1019]
stock yes i will continue buying more
[1022]
apple shares if it becomes undervalued
[1023]
because i like apple's products and
[1025]
services and because i believe apple has
[1027]
a great ios ecosystem that can protect
[1029]
itself from most competitors i already
[1031]
have had apple stock in my portfolio for
[1032]
many years it's almost a 10 berger stock
[1035]
it's the largest holding in my portfolio
[1037]
now based on my estimate i believe
[1039]
apple's fair interest rate is around 150
[1041]
dollars per share i will update apple's
[1043]
fair interest while you're every quarter
[1044]
once it releases its upcoming earnings
[1046]
if you want the latest intrinsic updates
[1048]
you can find them in my patreon blog in
[1050]
the video description now all these
[1052]
estimates are only my opinions and my
[1054]
analysis based on my research they are
[1056]
not financial wise as always make sure
[1058]
you always do your research and do your
[1060]
extra tutorials first before investing
[1062]
in anything if you like this video make
[1064]
sure to hit the like button subscribe
[1065]
and turn on the notification button i
[1067]
will continue to make many excellent
[1068]
stock analysis and investing videos a
[1071]
week that will help you become a great
[1072]
investor also if you like this channel
[1074]
and want to support it check out my
[1076]
patreon blog in the video description
[1077]
and become a premium member our goal is
[1079]
to help all members grow their stock
[1081]
portfolios to over seven figures over
[1083]
time with your support we'll be able to
[1085]
stay independent hire other outstanding
[1087]
analysts to cover different stocks and
[1089]
create many excellent stock analysis and
[1091]
investing videos a week that will help
[1092]
you become a great investor the link is
[1095]
in the video description thank you for
[1096]
watching this video and supporting our
[1098]
channel this video from the intouch
[1099]
investor channel and i will see in the
[1101]
next video
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