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APPLE INC (AAPL) Powered By Docstoc
					APPLE INC (AAPL)                                                                                        Sector: Informational Technology
Intrinsic Value         Purchase Price 52 Week High 52 Week Low                              Beta     P/E Market Cap            Dividend Yield
       $ 159.30                $ 132.90                  $202.96                $82.86       1.10     42.1 $116 billion (Large Cap)     0.00%
 Business Summary
                                                                                         •   The IT market is highly competitive with few large
 Apple Inc manufactures and sells personal computers
                                                                                             scale dominant players, which enjoy significant
 (Desktops iMac & MacPro and Notebooks MacBook &
                                                                                             market share and industry with emphasis of
 MacBook Pro, iPod, iPhone, hardware (Mac OS X Leopard)
                                                                                             technological innovation and pricing pressures. Main
 and software) and offers related services. It is operating
                                                                                             competitors are:
 globally with 60% of revenues coming from US, and it has
                                                                                         •   Microsoft Corporation (MSFT, $ 30.61)
 relatively small market share at this point worldwide in the
 computer segment, however iPod market share is growing                                  •   Dell Inc. (Dell, $ 20.03)
 rapidly. Total revenue, U.S. growth was 27% and                                         •   Hewlett Packard Corporation (HPQ, $ 43.99)
 international growth was 46%. Main sources of revenues                                  Company Specific Strengths
 2008 1Q is from iPod 42% and Mac 37% AAPL has                                           •   Strong innovation/R&D capabilities and emphasis
 diverse distribution channels – own retail stores/ direct                               •   Newly released operating system - Mac OS X
 sales force, online stores, third-party wholesalers,                                        Leopard (end 2007) are expected to have double digit
 resellers, and value-added resellers. AAPL in addition to                                   growth and have already collected higher revenues
 distribution of own products, in Apple stores sell also                                     than Tiger –previously released OS.
                                                                                         •   Strong MAC growth, 50% of sales in their retail stores
 third party components, which supplements their
                                                                                             from customers, who never had Mac
 products.                                                                               •   New iPod and iPhone sales are strong and expected to
 Industry Trends                                                                             increase
 • Highly competitive all segments of the industry                                       •   Success of consumer sales growth due to its retail
    nationally and internationally.                                                          stores locations
 • Innovation and technological advancement is a key                                     •   iTunes expansion into movie segment
    success factor                                                                       •   Extensive product portfolio
 • High global demand for technologic/ communication                                     Company Specific Threats
    products (smartphones, personal digital assistants, and                              •   Intense competitive environment to sustain innovation
    lightweight     portable    computers  with    wireless                              •   Supply and pricing risks are increasing
                                                                                         •   Competition from Windows Vista (MSFT)
 • Personal computers are expected to grow 10% in 2008
                                                                                         •   Local/global economic and international risks
 • Prices are decreasing
                                                                                         •   Legal issues pending

                                                                                                Expected Real Return                  5.90%
                                                                                                Assumed inflation                     2.5%
                                                                                                Assumed P/E                             24

                                                                                                Beta                                1.10
                                                                                                Risk Free Rate                     4.55%
 Source: AAPL 5year stock price analysis compared to market, DELL,
                                                                                                Risk Premium                       5.60%
 Financial Ratios                                                                               WACC rate                         10.71%
                           AAPL       DELL       HPQ         MSFT       Ind.
                                                                                                Growth Assumptions
 Return on Equity            29%        59%        19%         48%                              2008-2012                         21.00%
 Profit Margin               20%          6%       41%          6% 11.29%                       2013-2017                         10.00%
 PEG                        1.19        1.16       0.93       1.31          1.19                Perpetual                          4.50%
 P/E                       28.88 15.11 16.46 17.17                          29.3
                                                                                                Intrinsic Value                   $159.30
 Debt to Equity               0%        10%        21%          0%                              (Undervalued by 20%)

 Tax Rate                    32%        25%        21%         31%
                                                                                                Report Prepared By: Aija Pilvere
 Recommended to invest $40,000 at price $ 132.90