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AAPL valuation



April 17, 2013 – Comments (31)

Apple reported $44 in earnings over the last 4 quarters.  The current stock price is $400 and they have $140 billion in cash on hand.  They pay approximately a 1% dividend, maybe a hair more, maybe as much as 1.5% dividend yield at this depressed price, but let's just say 1%.

Therefore TTM P/E is 6; for a back of the envelope calculation, I like to subtract a point from that for every % of dividend yield, in terms of comparison to other stocks that don't pay dividends, and prior periods when the dividend yield was 0% or different.

It is not often that you get to buy AAPL in the 4.5-5 adjusted P/E range.  The market is either saying that AAPL is a huge value trap or non-rational methods of valuation are being used by market participants.  I believe the latter. 

31 Comments – Post Your Own

#1) On April 17, 2013 at 3:02 PM, ikkyu2 (98.13) wrote:

Er, to be clear, that 6 is a cash-adjusted TTM P/E figure.  Peter Lynch's books taught me to 'back out the cash'; after all, as an owner of the company, you are essentially buying part of that cash pile when you buy a share of stock with dollars.

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#2) On April 17, 2013 at 3:12 PM, Option1307 (30.53) wrote:

I like Apple at these levels and have started buying. With volatile markets like these buying in batches is key and that is what I have started with APPL specifically. Overall I wouldn't really touch the market right now, but Apple is sort of a special situation given the last several months of negativity surrounding it.

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#3) On April 17, 2013 at 3:16 PM, L0RDZ (90.15) wrote:

Its  a  trap....  see  the video,,,


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#4) On April 17, 2013 at 3:27 PM, L0RDZ (90.15) wrote:


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#5) On April 17, 2013 at 3:34 PM, elcid24 (50.64) wrote:

They pay approximately a 1% dividend

(4*2.65)/400 = 2.65% 

Peter Lynch's books taught me to 'back out the cash'

I like to subtract a point from that for every % of dividend yield

Interesting valuation technique (especially the subtracting dividend yield % from P/E part).  CATO is trading at a 2.5 P/E after you back out the cash, subtract a point for every % of dividend yield.  :)

What about stocks that lean toward buybacks over dividends (BBBY, CTSH, XOM, ROST)?  Do you have an alternate method for those?


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#6) On April 17, 2013 at 3:41 PM, L0RDZ (90.15) wrote:

Where are  you getting  your numbers  from ?  are  you just guessing ?   from the  current  expected  same dividend  the  dividend  rate  from  apple  is  over  2.5%

But...    according to  analysts that  only covers  US  generated  income...  

Apple announced its first dividend last March, and many investors have been hoping for more cash to be returned to shareholders. Sacconaghi noted that last year's announcement covered most of the company's U.S.-generated cash, so the company faces more complexities if it plans to "materially" increase its cash return this year.

So  if  Apple  considers  increasing   returning cash  to  its  sharehoders  they  will  have  to get  that money back  to  the states ?

If  that  money even  exists ?   I  have  a  sneaking suspicion that  Apple  has  had  cooked  its books  and  has been hiding  its  real  results  and  numbers. 

Regardess  I see  its stock  going  down,   otherwise why  would  the company not use  its  money to buy  the stock back at  what  you consider  to be  really  cheap  prices ?


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#7) On April 17, 2013 at 5:50 PM, awallejr (39.43) wrote:

I like owning stocks in things I buy and use.  I love the Iphone.  I keep adding happily.  I still think AAPL should buy out XRX for that chiplet technology alone.  They could even overpay at $25 a share and it would make only a little dent in their cash.

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#8) On April 18, 2013 at 1:15 PM, ikkyu2 (98.13) wrote:

As far as buybacks go, I don't have a great way to plug that into my quick and dirty valuation method (which I only use for companies with no debt, by the way.)  Sometimes - not always - you can get figures on how much stock was bought back TTM, but I have found it is much more difficult to predict how much stock will be bought back in future periods.

As far as whether AAPL should do buybacks and whether it will or ought to repatriate its foreign cash holdings:  I think buybacks would be a great use of cash at this price level, better for most shareholders than dividends.  I feel like AAPL ought not to repatriate foreign cash holdings while doing so incurs a 30%+ tax hit, but I don't have a strong opinion other than that.

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#9) On April 18, 2013 at 1:40 PM, L0RDZ (90.15) wrote:

I've been  saying timber...    is  anyone  bothering to look ?

So  IKK  are  you  gonna  admit  to  being wrong  about  apple's  dividend rate  ?

Awall how  are  you liking  the  lower and lower  apple  price of  the stock..  ?  are  you buying  more on the way down ?

What do  you think  gonna happen when  carriers  stop  forking money over  to apple  for  its  phones ?  to  provide  for  its  users ?


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#10) On April 18, 2013 at 5:04 PM, awallejr (39.43) wrote:

Just bought 3 more after hours at $390.50.  It is quite possible I will have my 100 shares sooner than I thought and without a split.  Kind of reminds me of the '08-'09 crash days but this time I have dry powder to act with.

Well they might do what T-mobile is doing.

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#11) On April 18, 2013 at 5:49 PM, L0RDZ (90.15) wrote:

According to   the  bean  counters  and  I  use  that term  loosely  given  the  recent  KPMG  accounting  scandal  as well  as  the arthur  anderson  debacle  involving  Enron.

Apple  has Cash per share (MRQ)42.41

roughly  only  42 dollars cash per share or  roughly  10%  of  the current  trading  price is  attributable  to  the  share price...   they have  roughly  939.1 million  shares  ~  doing  the math  ~  means  the company  has roughly 39,442.2  million   in  cash ?

wait  is  that right  ?   thats  only  3.9 billion >>>  ??? why  do I keep hearing  that  they  have  140 billion  in  cash ????

something doesn't  sound  or  smell right  in  bean town...  so are you telling me  that  133 billion either  doesn't  exist ?  can't  be  accounted  for  ?  or  is just a  strange  lie ?


Do  your  own  research... 

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#12) On April 18, 2013 at 5:59 PM, L0RDZ (90.15) wrote:

Can someone please  point  to me  where  these guys  have  140 billion  in  cash  on hand ?  because  that doesn't add up to any  numbers  I'm seeing anywhere on  any  financial  statement  anywhere ?

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#13) On April 18, 2013 at 6:27 PM, awallejr (39.43) wrote:

Well I suppose I have the right being the owner of 13 shares of AAPL to knock on HQs doors and insist on seeing their books, but somehow I don't see that happening.  Maybe on a conference call after earnings is out April 23 one of the analysts can ask.

I did look at Value Line and it shows about 40 billion cash.  So let's use that number.  Back it out puts stock at 350 divide that by $44 projected full year earnings and you are looking at an 8 PE with a 2.7% current dividend yield.  Find the other 100 billion and you are looking at even sweeter numbers I suppose.

What can I say Lordz, I love the products. I love the valuation, this company is not going BK anytime soon especially with zero debt.   I will continue to buy at these levels or lower. 

Did that with XRX and bled red for awhile but my DD is paying off and I am solidly in the green as long as it stays over 7. And should it fall under, I will buy more.

April 23 is going to be an interesting day for me since both release earnings then.

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#14) On April 18, 2013 at 6:29 PM, ElCid16 (93.16) wrote:

#11, 12

Much of their cash hoard has been moved into long-term, yet fairly liquid investments.  You didn't really think they'd just have $140B sitting in a checking account, did you?  :)

A very simple scan of their 10K would have revealed this.  Maybe you should take a spoonful of your own medicine and "do your own research..."

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#15) On April 18, 2013 at 6:56 PM, L0RDZ (90.15) wrote:

I  like you  awall can  only find  just  under  40 billion  in  cash...  on  any  financial  statement...    come  on  we  are  talking  about  100  billion dollars ???

In  what  banks  in what   fairly liquid  investments  is  this  in  ???

greek  bonds  ?    in  cyprus  banks ?   gold  coins ?   okay  lets say  that  the 100 billion  is  in  outside  banks  outside of the USA  so as to not  incur  them any  US  federal  taxation  as  they  state  on  their  financial  statements  that  they  intend to perpetually  invest and keep that money  outside  of  the  USA  ~  that  means  that  shareholders  can  never  get  at   these assets ?

So  IMHO  Apple  might as well  as   bought  a  really huge pile  of  cocaine  from  columbian  drug  lords  ~  because  shareholders  imho  will  forever  be  kept  away  from  this ?  so what  good  is  that  ?    so I  jokingly  say  that  apple  might  as  well as blown  that  money  to   send   thousands  of  people to the emergency rooms  with cardiac  issues  from  racing  hearts  and  dilated pupils.

Because  apple shareholders will forever be  kept  away  from  what  is  a  lot  of  loot...

thats all i'm saying...  

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#16) On April 18, 2013 at 7:20 PM, ElCid16 (93.16) wrote:

Page 7.

"Do your own research" - LordZ.


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#17) On April 18, 2013 at 7:26 PM, awallejr (39.43) wrote:

Total cash, cash equivalents and marketable securities $121,251  

This from their 10-k for 2012.  Elcid beat me to it.

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#18) On April 18, 2013 at 7:27 PM, awallejr (39.43) wrote:

oops that is in millions btw, so $121,251,000,000.

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#19) On April 18, 2013 at 8:15 PM, L0RDZ (90.15) wrote:

Thanks EIC... but   if  I'm reading that  correctly   it  says  they have  7 bill  in  cash

3.6  bill in mutual funds

3.6 bill in money market funds

22.8 bill in  US  treasury securities

20.6bill in  us  agency securities

4.6 in  non us securities

2.3 in cert  deposits

2 in commercial paper

49.3 in corp securities

6 in municipal securities

13.6 in mortgage backed  and asset backed securities

on  paper  its  roughly  121.8  billion  of  which  only 7 billlion is  directly  in  cash  the   difference   can be  more or  less or worthless depending on  financial  conditions and  what  they  are invested in...

honestly  unless  apple  does a  whole  lot of selling  according to  said  10-k  they only have  16 billion  in  cash and cash equilavents.. the  remainder  is   23  bill  in short term securities  and 97  bill  in  long  term  securities...

Basically they only  have  enough to cover   expected dividends  and  cover  us  operational  expenses  and  some  stock buy backing... 


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#20) On April 18, 2013 at 8:17 PM, L0RDZ (90.15) wrote:

So again  I'm   puzzled  by which  financial  statement  is more accurate...

do they have  40 billion ?


16billion  ?

in  cash  and  cash  equilavents...



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#21) On April 18, 2013 at 9:28 PM, jiltin (47.31) wrote:

As I said in one of comments, I purchased 30 AAPL  at $423 with the intention of keeping for a long time. However, I sold it when was $431 because price war from samsung.  Here are the reasons.

Since the introduction of S4, there was a splash sale of S3 at amazon and walmart for 9.99 two years contract. Amazon and walmart sold out all S3 and out of stock in 2 days. Even though apple has got lot of products, one of the main bread winner is iphone which is routed by SamSung. In addition, Samsung reduced S4 from $250 to $199. 

These are the two sales giants (amazon,walmart) and we do not know how many million users, like me, switched from Apple iphone to S3.  Those millions of users lost are permanent loss for at least two years. It is not like NFLX that customers can jump over fence next day.

The impact will not be known in 4/23 results, but will reflect in future AAPL results. Being the market is looking downward for next one month like bearish hit, some institutional investors started dumping AAPL. If 4/23 results are not meeting the expected, it will go drastically. If results are fine, it will still go down, but slowly. In addition, Tim will have pressure to produce results. 

Even though I am new to stocks, I am not a big guy like TIM COOK or Insitutional investors. Rather than focusing how apple can recover or how it can perform,  I focus on how to gain given the situation. We can not change the big guys in apple, but we can change our path. 

Hindsight, I am happy that my intuition to sell AAPL is correct. This is the first time I purchased AAPL. I would have easily lost $1200 over 10 days. 

Now, frankly, I am scared with stock market, moved to tax-free bonds at least next two months.



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#22) On April 18, 2013 at 9:32 PM, awallejr (39.43) wrote:

Ok Lordz now you are being obtuse.

And jiltin you should never just buy your full position at once.  You should always scale in.

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#23) On April 18, 2013 at 9:51 PM, L0RDZ (90.15) wrote:

Good  job   jiltin

I  found your previous  post most  informative  as to  the  expected  downward direction  apple  still  likely  will follow.

The worst thing one could  do  is to  ride a  stock  down  ~  instead  you  changed  your  opinion   as  you saw  the stock change.

Most people  can't  or  won't  do that...  speaking of  smaller  investors...    I'm  sure  theres some  little investors  out there who bought  in  for the long term  around 700  or  600 or  even  500  who  are  in a  world  of hurt  thinking  they got in at a good price... 

I can  see apple  going  the way  of   the  walk-man...  the vcr...  the  8 track...    or  being  like  microsofty  if  they are so lucky... back  during the  1999 internet  crash  when  they were  basing  stock prices upon  clicks, hits,  and  other  bogus  non  income  producing things  that  produced nothing to sustainability  or  profit...     microsoft  was  around  100  a  share  I've been  told...    imagine  if  you had  bought some  than  or  say   yahoo when it was  trading  really high...

many people  had been  wiped out so badly  they had no stomach  or  money  to  be in  the markets  for  the 2007-2008  world crash...


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#24) On April 18, 2013 at 9:56 PM, L0RDZ (90.15) wrote:

EIC  that  10-Q by apple  was  one  of  the more impressive  one's  i've  read...  too  bad  that stock  is  still  expected  to  go further down.

Sometimes good companies just don't  always make for good  investments.


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#25) On April 18, 2013 at 10:21 PM, awallejr (39.43) wrote:

Lordz are you short the stock?  Because you are sounding more like a Yahoo poster.  AAPL has at worse a PE of 8.  Let me repeat, a PE of 8 (I am discounting the $100 billion you think doesn't exist).  Stop making it sound like its PE is 100.

Jiltin admits to being new at stocks.  I gave him good advice.  Cost average in.  If you bought a stock with the intentions to hold it for a long time then short term drops are opportunities to take advantage of.

That is exactly what I did with XRX as it dropped to low $6 and I will do with AAPL should it continue to drop because I am confident it will see $600+ in the future and it yields more than what any bank account would pay me. 

But if Jiltin can't handle the daily swings then muni bonds are the place for him. Or he might want to look at MLPS, BDCS (which will outperform the large banks) and REITS.

I am sorry, as did Alstry over the years we fought until he capitulated and left, you are giving people bad advice.

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#26) On April 18, 2013 at 11:20 PM, Valyooo (34.17) wrote:

I keep thinking "wow aapl seems so cheap, I really should buy".  Then I had a convo with a friend today who reminded me of nokia....had awesome market share, was doing great, then had some negative growth for a quarter and bam the stock got cut 80%, same with happens with tech stocks all the time.  Margins and market share all that seems hard to imagine but what if it gets dominated by goog and samsung?  Idk....I think it could fall further, the chart is gross....maybe I would buy some at $300

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#27) On April 19, 2013 at 12:06 AM, BlueCollarTrade (28.29) wrote:

I am just as surprised that AAPL has breached below $400 as everyone else.    If AAPL misses on earnings or revenue, this stock could easily tumble to down to $350, which may be the flush that the stock needs to begin an upward trend.    Be careful out there!   

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#28) On April 19, 2013 at 2:10 AM, awallejr (39.43) wrote:

Actually I wouldn't mind that #27.

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#29) On April 21, 2013 at 12:15 AM, ikkyu2 (98.13) wrote:

I appreciate the lively discussion from all.  As for the truth, time will tell!

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#30) On April 24, 2013 at 10:59 AM, jiltin (47.31) wrote:


You are perfectly right on this "But if Jiltin can't handle the daily swings then muni bonds are the place for him. Or he might want to look at MLPS, BDCS (which will outperform the large banks) and REITS."

After selling AAPL, I am unable to withstand the daily price fluctuations. Hence, I moved main portfolio to taxfree NCA,NCO,NQC, NVC.  I am not so much disturbed now. 

For my learning purpose, I play with stock with less amount. I need at least another six months to learn the risk/issues.

But, I just want to inform you that Tim is not doing right. Big Buyback without future growth will hurt him rather than help him. Instead of identifying and resolving issues, he is making it complex. If top management is not thinking right direction, it is not good for the company.



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#31) On April 24, 2013 at 11:02 AM, jiltin (47.31) wrote:

Regarding Apple, I like some of their  products & quality and I use them daily at work, but Apple, as a company, is not in right direction after Steve Jobs.

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