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Post by aaplsauce on Aug 22, 2021 22:16:22 GMT -8
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Dave
Member
"It's tough to make predictions, especially about the future." Yogi Berra
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Post by Dave on Aug 23, 2021 1:43:02 GMT -8
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Dave
Member
"It's tough to make predictions, especially about the future." Yogi Berra
Posts: 4,335
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Post by Dave on Aug 23, 2021 1:50:26 GMT -8
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Dave
Member
"It's tough to make predictions, especially about the future." Yogi Berra
Posts: 4,335
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Post by Dave on Aug 23, 2021 2:07:39 GMT -8
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chinacat
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AAPL Long since 2006
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Post by chinacat on Aug 23, 2021 7:22:22 GMT -8
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4aapl
Moderator
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Post by 4aapl on Aug 23, 2021 7:26:41 GMT -8
As we're likely in a quiet week in news for Apple, let's see if we can get our post count up a bit, and maybe hear from some we don't hear from often. I have a couple questions, loosely based on some from the book Capital Allocators.
For those that think AAPL is likely to exceed annualized gains of 15-20% over the coming 5 years, what do you think the catalyst is going to be that makes that happen?
Likewise, for those expecting an annualized rate of 20% or less, what could make AAPL exceed that over the next 5 years?
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mark
fire starter
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Post by mark on Aug 23, 2021 10:41:35 GMT -8
As we're likely in a quiet week in news for Apple, let's see if we can get our post count up a bit, and maybe hear from some we don't hear from often. I have a couple questions, loosely based on some from the book Capital Allocators. For those that think AAPL is likely to exceed annualized gains of 15-20% over the coming 5 years, what do you think the catalyst is going to be that makes that happen? Likewise, for those expecting an annualized rate of 20% or less, what could make AAPL exceed that over the next 5 years? At a 20% average rate over 5 years, that comes to about a 2.5X valuation. Today, the company is worth about $2.5T, so that return would make it worth $6.25T in 5 years (adjust for inflation blah blah blah). That would mean that the company has to be earning about $200B a year (at about a 30X P/E). That, in turn, would require an entirely new product line to be introduced like the iPhone in 2007. And it would require that new product line to mature (i.e. become widely popular among customers) rapidly during those 5 years. I think it is possible, but not very likely. Seems like any new major product line would happen in more than a year or two from now ... I say that because due to the current lack of secrecy at all levels, there would be rumors already now if it were imminent.
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4aapl
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Post by 4aapl on Aug 23, 2021 12:52:01 GMT -8
If you back out the average 6% buyback, it’s only a 1.925 multiple, or call it double over 5 years.
Anyone?
I agree, it seems unlikely at only a 30 multiple, but what would a 35x multiple, a new product or two, and maybe a higher asp by adding an even higher end model with more profit there and with services.
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Post by dc930 on Aug 23, 2021 13:49:40 GMT -8
If you back out the average 6% buyback, it’s only a 1.925 multiple, or call it double over 5 years. Anyone? I agree, it seems unlikely at only a 30 multiple, but what would a 35x multiple, a new product or two, and maybe a higher asp by adding an even higher end model with more profit there and with services. I'm taking the pragmatic approach and assuming the majority of gains in AAPL over the next 5 years will be due to share repurchases, with modest top-line growth. This helps keep my expectations in check and allows for yet another upside surprise. At this point, after benefitting from the past 15 years, I am happy to keep $$ parked in AAPL as a blue-chip stable (relatively!) stock with decent upside.
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ono
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posted
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Post by ono on Aug 23, 2021 14:32:10 GMT -8
Really, I would be content with 10% CAGR over 5 years, of which buybacks are a robust part of, and a little less volatility. CAGR factoring in continued buybacks: seekingalpha.com/article/4440375-apple-stock-aapl-the-infinite-buyback-pump"As per the above results, Apple's stock price could grow from ~$142 to $511 over the next ten years at a CAGR rate of 13.66%. After factoring in potential dividends, Apple's projected return is 14.23%." In order to formulate these projections, I have utilized a somewhat conservative 7.5% growth rate for free cash flow. Apple Stock Buyback Projections
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Post by Luckychoices on Aug 23, 2021 15:40:36 GMT -8
I came across an article on Seeking Alpha which has a positive outlook for AAPL: Is Apple Expensive At A $2.5 Trillion Valuation? Here's Why We Don't Think So This is the summary of the article:Apple is valued at more than $2.4 trillion in the market, but that doesn't tell you anything about its fair value. The pricing power of Apple coupled with the outlook for its services segment holds the key to the company's future. To determine whether stock buybacks can add value to long-term shareholders, one needs to look at the big picture. This is the takeaway of the article:We believe Apple has a clear path toward steady revenue and earnings growth, but we also believe that investors need to monitor a few risks associated with the company such as the increased regulatory scrutiny on big tech companies. For example, Alphabet, Inc. (NASDAQ:GOOG) pays Apple to use Google as the default search engine on its devices, but there is a possibility that Apple may lose this revenue stream from Google in case regulators decide against this practice. We are closely monitoring the supply chain disruptions that might threaten the production of new devices as well, but at this point, we do not see any long-term threats. Apple is not cheaply valued in the market, but then again, we don't think that a forward P/E of 26 is expensive for Apple considering our projection for slow and steady earnings growth for at least another decade. Although growth investors might find better bets elsewhere, we view AAPL as a top pick for any value investor even at the current market price. And this is the most negative comment on the article:brettze Comments (3.4K) One thing I know for sure is that a lot of stocks are undervalued because of Apple as everyone is flocking there. Apple can keep going up forever but what about those undervalued stocks? We can only make pies so big yet Apple always gets the biggest slices by far. often half slice.. We are creating a floating city here.. It cannot happen but we are pretending ..and keeping at it . it is inviting trouble some day through some unexpected events that will topple Apple over and many of us will be left with a fraction of what we used to have. We are seeing growing inflation because Apple brought us back there.. indirectly.. If Apple can overcharge people anything, so why dont we do the same with our commodities and other things.. as well. Then it will start spinning out of control. Apple consumers are still throwing purses and wallets at Apple non stop Apple can keep barrelling ahead past 3, 4, 5 trillion in valuation, then what?I dont think that the rest of us will stand still. We will follow Apples ' "bad examples" I cannot really pinpoint whawt is really wrong with Apple but it is really getting too pretentious to my own liking. It has nothing to do with my prejudices.. I am just getting more cynical toward Apple and the consumers at large.. Most of Apple's customers are really hurting to stay "perfect" and keeping up with the status quo.. I just know that.. I wouldnt touch Apple at all. It is a herd mentality stock which mean that a portion of the herd will be so quick to get out without any losses and will leave the rest of the herd with losses. One day it will hit you! you will be speechless. and weeping.. Herd mentality gives you a feeling of security but the truth is that a portion of the traders will abandon you so swiftly wihtout you knowing it.. and they will never come back . you will be left with permanent losses.. and hesistant about selling or not with hopiong that Apple will rebound. then it can happen again with another swift selling and again leaving you deeper in the hole.. Apple is heavily reliant on China.. which is the biggest turn off for me. ======= OK, I'm not sure I really understood *exactly* I didn't understand much of what was meant by the comment...but I picked up enough to know he is not now...and never will be...a member of AFB. 😊
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mark
fire starter
Posts: 1,632
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Post by mark on Aug 23, 2021 17:49:24 GMT -8
If you back out the average 6% buyback, it’s only a 1.925 multiple, or call it double over 5 years. Anyone? I agree, it seems unlikely at only a 30 multiple, but what would a 35x multiple, a new product or two, and maybe a higher asp by adding an even higher end model with more profit there and with services. 6% a year? That's $150B this year, ~$185B next, ~$220B, ~$265B, and $300B in 5 years (using your numbers of a rough double in market cap over the 5 years). That's a total of over $1T in real cash. Are you also assuming that cash flow will *more* (substantially more) than double over the next 5 years? I really don't understand this particular statement in that comment. Have Apple's gross margins changed all that much today when compared to 10 years ago? I don't think so, I mean I didn't bother looking it up, but I don't recall a huge upward movement in gross margins, they seem to vary by a point or two, maybe three in a really good year.
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Post by hyci004 on Aug 23, 2021 18:53:28 GMT -8
Apple’s gross margin in the last eight quarters.
Q4’19 - 37.97% Q1’20 - 38.40% Q2’20 - 38.40% Q3’20 - 37.99% Q4’20 - 38.2% Q1’21 - 39.78% Q2’21 - 42.51% Q3’21 - 43.29%
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Post by hyci004 on Aug 23, 2021 19:06:36 GMT -8
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Post by hledgard on Aug 23, 2021 19:16:34 GMT -8
Great summary Luckychoices ! ! Really appreciate your posting and take on the article. Sober talk.
Thanks ! !
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4aapl
Moderator
Posts: 3,868
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Post by 4aapl on Aug 23, 2021 21:26:16 GMT -8
If you back out the average 6% buyback, it’s only a 1.925 multiple, or call it double over 5 years. Anyone? I agree, it seems unlikely at only a 30 multiple, but what would a 35x multiple, a new product or two, and maybe a higher asp by adding an even higher end model with more profit there and with services. 6% a year? That's $150B this year, ~$185B next, ~$220B, ~$265B, and $300B in 5 years (using your numbers of a rough double in market cap over the 5 years). That's a total of over $1T in real cash. Are you also assuming that cash flow will *more* (substantially more) than double over the next 5 years? We skipped town today in a quest to find cleanish air. The first day of school is on day for day slip, but they don't let us know until 5:30am. More daily road trips this week seem likely. I tend to use 15% annualized as the hopeful upside when AAPL is somewhat fairly valued, 20% as the high end in the shorter term especially when undervalued, and 10% as a likely long term average from here. But this book points out an important thing that I have sometimes done, of not just looking at what you feel is likely, but trying to put some probabilities on it and think about what would make it do better, or what could make it do worse. Today was the better scenario, and I really thought we would have a couple people jump on it somehow. There is the whole car thing, with high revenue, likely lower profit margin, but large profit per unit. It should be big enough to move the needle, potentially. But though some electric vehicle and related stocks have really taken off (for better or worse), I don't imagine AAPL would shoot to the moon because of an entrance into that space. OTOH, the easiest way for AAPL to make an annualized 20% over the next 5 years would be for that trailing P/E to jump from 30x to 40x again, likely on the tails of an overall market bubble being made, which could depend on how much money and low interest rates continue to be poured into the economy. It looks like the Fed has a plan, but even in '98 with Greenspan seeing problems and trying to pull back through increased interest rates and such, the run still went on for a while more. Add in Apple continuing on it's normal path of making great products that more and more people buy (especially in an upcycle, as more luxuries are afforded), and it wouldn't take too much unexpectedness to happen in order to hit those overall returns on AAPL. Possible? Maybe But likely? 20% seems to be pushing it for the longer term, even though the trailing 12 months just hit about 20%, going from the tippy top of $500/$125 around a day into September, to $150 now. Cha-ching! Even so, when looking at a 5 (or 10) year outlook, I'm thinking 15% on the bullish side, and 10% on the fairly high probability side (while thinking the market will do 8-10%). Tomorrow, the question is again from the thoughts of Capital Allocators and doing a pre-mortum. If AAPL wasn't to do as well as you expected over the next 5 (or 10) years, what would have been the cause?
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Post by silkstone on Aug 24, 2021 2:24:07 GMT -8
4aapl - Tomorrow, the question is again from the thoughts of Capital Allocators and doing a pre-mortum. If AAPL wasn't to do as well as you expected over the next 5 (or 10) years, what would have been the cause.
it would be due to the overall economy suffering, due to what seems like the snowballing effects (catastrophic heat, storms, flooding and fire) of people not taking enough direct action against climate change.
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