A ContrarianUK piece
Financials At a stock price of $614, Apple has a market capitalisation of $566 billion. 2011 revenue were $109 billion with revenue per employee of $2.2 million - a phenomenal sum that pays testimony to the creative genius of Apple. In July 2002 the company’s shares were $9. Someone investing $100 in 2002 would now have an investment worth $6820 in 2012! The company spends nearly $2.5 billion on research and development. Net income was $26 billion in 2011 compared with $3.5 billion in 2007, a seven and a half fold increase. In 2011 cash and short term investments totalled $26 billion with no debt. Estimates for the year October to September 2012 are for earnings of $46-47 and so a modest price/earnings of just over 13 times. For 2012/13 average estimates are for $54 in earnings. The 52 week high is $644 and low is $349, opening 2012 at $356. The company is so large that it now accounts for 12% of the Nasdaq Composite and 4.5% of the S&P 500. In March 2012 Apple has said it will use its cash pile to start paying a dividend to shareholders and to buy back some of its shares. It will pay a quarterly dividend of $2.65 per share from July and buy back $10 billion of its shares starting in the company’s next financial year which begins on 30 September 2012. The dividend and buy back will cost an estimated $45 billion over the next three years. The last time the company paid a dividend was 1995; two years before Jobs came back to the company in a state of disarray.
The future The question is what the future holds for Apple? Will it be like the last 15 years, or are things getting tougher for the success story above all other success stories? Is Tim Cook up to the task and can he step into the very large shoes that Jobs left behind...?
60 www.financial-spread-betting.com | July 2012
It is hard to imagine now, but Microsoft helped bail out the company with a $150 million investment in 1997. Its shares had collapsed under the leadership of Gil Amelio and John Sculley who took the helm from Jobs after he was ousted from the company and left to found NeXT (a new computer company) and buy animation studio Pixar - from which he went on to make over a billion dollars. Apple continues to throw out exciting new products from its R&D department. It recently launched a well received new ultra thin Mac Book Pro computer with a super high resolution retina display which followed the iPad 3 in March this year. Apple will report earnings for its third fiscal quarter on Tuesday, July 24 (its fiscal year is between October and September). Investors will be looking at the performance of the iPhone and eagerly await news of the next generation iPhone 5 due out this autumn. There are rumours of a mini iPad to compete with the Samsung Galaxy Tablet range and possibly the much anticipated Apple TV set - in short, an exciting array of products for the Apple acolytes, and that should continue to keep the coffers of the company overflowing... The consensus forecast for the next quarter in terms of revenues is $37.5 billion or $10.4 per share compared with $12.39 for the last quarter, but given the anticipated launch of IPhone 5 this figure could well be under pressure as consumers put off upgrading their phones and avoid the current iPhone 4S model. iPhone shipments are expected to be 27-28 million in the quarter. Analysts are expecting iPad sales to come in around the 15-20 million mark compared with 9.25 million in the same quarter in 2011. If Apple can generate the expected earnings of $47 for the year ending September 2012, that puts it on a forward p/e of around 13. If it can increase earnings to $53 with the launch of iPhone 5 and Apple TV set in late 2012/13 then it puts the company on a very undemanding p/e of 11 times. Compare that with Facebook at a p/e of 63 at its current $30 price!