5 years ago
My take: With the Street no longer expecting an iPhone supercycle, the focus will shift to repatriation, stock buybacks and management's guidance for Q3.
I'll be eavesdropping on Apple's Q2 earnings call with analysts, and you can too. Click here for instructions.
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The real story is that Apple overall has excellent growth for a company of its size. Coupled with buybacks, we can expect a sustained EPS growth of around 10% p.a. and dividend growth at a higher rate.
Caveat: All predictions, including the above, are fiction.
Watch what happens to the stock when Apple reports the expansion of its Share Repurchase Program on the order of $250B – $300B over the next 2-3 years.
There has never been a safer time to own this stock.
As Jeff mentions above, Apple projects a 15% yoy growth in revenue last quarter. Assuming net income grew an equal 15% last quarter, that’s a total yoy net income to date of $52.2 B. If Apple simultaneously reduced the share count to 4.866 B, that’s an EPS of $10.73/share. At today’s price of $166.36, that’s a P/E of 15.5, or a P/E compression of 4.3%.
And if Apple’s P/E is equal to 20 at Apple’s next earnings report? At Q1 fy ’18’s “real” EPS of about $10/share, that’s a price of $200/share. At the projected EPS of $10.73, the P/E would compress to 18.64, or a P/E compression of 6.8%.
So how many times does Mr. Market have to get a 2×4 over the head before he wakes up and smells the coffee? What does it take to get him to realize that the reason the P/E is compressing is NOT because there’s something wrong with Apple, but because there’s something right?!