Apple: The Past Decade Can't Be Repeated

Seeking Alpha2021-10-19

Summary A return of more than 860% in 10 years made many shareholders happy. This return was based on double-digit growth rates, aggressive buybacks and a solid customer base. However, slowing growth...

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精彩评论

ShawnKoh1
2021-10-19
ShawnKoh1
Like
- ShawnKoh1:
  like
boonhong21
2021-10-19
boonhong21
Nice
TC93
2021-10-19
TC93
Cool
JunHaoT
2021-10-19
JunHaoT
Apple car next?
- Melvin888:
  Yeah!
- Hougang:
  [强]
Nyannie
2021-10-19
Nyannie
Good
- Nyannie:
  Mice
pekss
2021-10-19
pekss
I feel that AAPL is now more a value play than growth play, as gone are its days of exponential growth.
- evepek:
  Yes
- JunHaoT:
  Still can grow, but need another revolution product. Anyway is a cash cow, because of its ecosystem.

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Looking back at an impressive decade\nApple's (AAPL) stock showed a stunning performance over the last 10 years.\nData by YCharts\nThe stock returned 861% or 25.4% annually, which is an above average return compared to the S&P 500 with just about 263%. Apple has a stunning growth record over the past decade which is one reason for the long rally. Revenues grew from $108 bn. in 2011 to expected revenues in 2021 of $365 bn. (+238%) while net income increased from $26 bn. to $95 bn. in 2021 (+265%).\n\n\n\n2011\n2012\n2013\n2014\n2015\n2016\n2017\n2018\n2019\n2020\n2021 (e)\n\n\nRevenue (bn. USD)\n108\n156\n171\n183\n231\n214\n229\n266\n260\n274\n365\n\n\nNet income (bn. USD)\n26\n42\n37\n40\n53\n46\n48\n60\n55\n57\n95\n\n\nEPS*(USD)\n1.56\n2.51\n2.22\n2.38\n3.21\n2.75\n2.91\n3.57\n3.33\n3.45\n5.7\n\n\n\n[*EPS numbers adjusted for stock splits in 2015 (7:1) and 2020 (4:1), calculation with 16.63 billion shares]\n2. Aggressive buybacks\nAlthough the company's fundamental growth was great, the stock's gain was even more phenomenal. A second reason were permanent and aggressive stock buybacks by Apple. In2011, Apple had 926 million shares outstanding, according to the quarterly report from June. Adjusted for the two stock splits, the number should have increased to 25.93 bn. shares. Surprisingly, Apple had just 16.63 bn. shares outstanding at the end of June 2021, which means that share count was reduced by nearly 36% in just one decade. The buybacks definitely contributed to the stock's stellar performance, but the higher the stock climbed over the years, the more Apple had to pay to buy back shares. The buybacks are reflected in the company's balance sheet which has worsened significantly.\n\n\n\n2011\n2012\n2013\n2014\n2015\n2016\n2017\n2018\n2019\n2020\n2021\n\n\nEquity (bn. USD)\n70\n118\n124\n111\n119\n128\n134\n107\n90\n65\n64\n\n\nLiabilities (bn. USD)\n37\n58\n83\n120\n171\n193\n241\n259\n248\n259\n265\n\n\nEquity ratio (%)\n65\n67\n60\n48\n41\n40\n36\n29\n27\n20\n19.5\n\n\n\nEquity and equity ratio are in an obvious downward trend while liabilities have increased. However, the deterioration of the balance sheet hasn't had an impact yet on Apple's power to generate and increase revenues and earnings. With $95 bn. net income this year, Apple shows a return on equity (ROE) of 148% (!), a number not many companies achieve. So while the balance sheet is nothing to worry about in regard to Apple's business, it will have an impact on the company's ability to buy back shares. Even if Apple spends all its net income on buybacks (which would be a new annual buyback record), this number would just represent 3.9% of Apple's total market cap of $2.41 trillion. As a result, the company must spend more cash in the future to buy back the same percentage of shares as it did during the last ten years.\n3. Valuation\nApple currently trades for $145 per share (as of 10/18/21) and has a total market cap of $2.41 trillion. EPS for 2021 is about $5.7, so the P/E ratio is 25.4. The P/B ratio climbed to a whopping 37.6 (which can be partly explained by buybacks). High P/B ratios are not unusual for tech companies (many patents, intangible assets and brand value do not count for equity), but the number for Apple is really extreme. Cash flow per share of around $6.5 per share results in a P/CF ratio of 22. The average EPS of the last decade was $3.2. Hence, the CAPE ratio for Apple is 45.3, a number which also indicates an ambitious valuation.\nAll these numbers indicate that future returns are likely to be lower than the returns of the past decade.\n4. Growth perspectives and product pipeline\nIn the past decade, Apple grew its net income by 13.8% annually and expects an increase of more than 66% this year. In the third quarter 2021, Apple increased its computer sales by 7.4% and increased its market share to 8.6% of worldwide sales. Smartphone sales decreased in the third quarter 2021 by 6% because of the chip shortage, but Apple increased its market share from 12% to 15% due to strong demand for the iPhone 13, which means that shipments grew by ca. 17% YoY. All in all, the market data shows that consumers strongly demand Apple products (MacBook, iPhone, iPad etc.) and also accept higher expenditures for high-quality products. However, the chip shortage will likely hurt Apple's sales in the quarters to come. Hence, it will be difficult for Apple to grow next year as revenues will take a hit. In the long term, Apple must differentiate from its competitors Samsung (OTC:SSNLF), Lenovo (OTCPK:LNVGY,OTCPK:LNVGF),HP Inc. (HPQ) andXiaomi(OTCPK:XIACF,OTCPK:XIACY) with special features and design, because some consumers (who are not pure Apple fans) will prefer price over features and design. I expect revenues to be flat next year or even lower than 2021 when the post-pandemic computer boom will flatten. The average growth rate for net income and revenue in the next decade is probably lower than in the past decade.\n5. Conclusion\nSince Apple's total market cap is already very high, it will be harder to boost share performance via buybacks. Consequently, the stock's total performance in the next decade (2022-2032) will be lower than the performance in the 2010s, especially because the stock has already outperformed Apple's fundamental performance.\nMy conservative estimate is a net income growth rate of 5-7% p.a. and a buyback yield of just 1.5-2.0%. The earnings yield for the stock is currently 4% (P/E ratio of 25). Hence, the total annual return for the next ten years will possibly be between 5.5-9.0% which is significantly lower than the 25.4% from 2011-2021.\nAll in all, even at a current stock price of $145 per share, shareholders can expect a positive return, but adjusted for inflation, Apple will disappoint in the future compared to the last ten years. Due to a combination of lower growth (high competition, chip shortage), a lower buyback yield and a higher inflation which will increase the company's costs, Apple's stock will no longer outperform the market despite a promising product pipeline and a loyal customer base. The share price is the most important factor for future returns, and $145 per share is currently not very attractive.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":850481183,"gmtCreate":1634617079215,"gmtModify":1634617079497,"author":{"id":"3570598542159923","authorId":"3570598542159923","authorIdStr":"3570598542159923","name":"ShawnKoh1","avatar":"https://static.tigerbbs.com/0045c4894f8a2755b17a9e8518df4d5e","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3570598542159923"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/850481183","repostId":1175707103,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6249812,"gmtCreate":1634617086179,"gmtModify":1634631618848,"authorId":3570598542159923,"author":{"id":3570598542159923,"authorId":3570598542159923,"name":"ShawnKoh1","avatar":"https://static.tigerbbs.com/0045c4894f8a2755b17a9e8518df4d5e","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":850481183,"type":1,"supId":0,"prevId":0,"content":"like","text":"like","html":"like"}],"langContent":"CN"},{"id":850483725,"gmtCreate":1634617050449,"gmtModify":1634617051196,"author":{"id":"3575147848250182","authorId":"3575147848250182","authorIdStr":"3575147848250182","name":"boonhong21","avatar":"https://static.tigerbbs.com/4576487764c99ea59dfd1cfcdf89da5b","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"3575147848250182"},"htmlText":"Nice","listText":"Nice","text":"Nice","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/850483725","repostId":1175707103,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":850434358,"gmtCreate":1634615284120,"gmtModify":1634615556545,"author":{"id":"3582232015540876","authorId":"3582232015540876","authorIdStr":"3582232015540876","name":"TC93","avatar":"https://static.tigerbbs.com/6a18b473e3eeffa8d209febc34817e5b","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3582232015540876"},"htmlText":"Cool","listText":"Cool","text":"Cool","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/850434358","repostId":1175707103,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":850496292,"gmtCreate":1634614134665,"gmtModify":1634614134990,"author":{"id":"4091088321144510","authorId":"4091088321144510","authorIdStr":"4091088321144510","name":"JunHaoT","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"idStr":"4091088321144510"},"htmlText":"Apple car next?&nbsp;","listText":"Apple car next?&nbsp;","text":"Apple car next?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":2,"repostSize":0,"link":"https://laohu8.com/post/850496292","repostId":1175707103,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6249519,"gmtCreate":1634615502785,"gmtModify":1634631644789,"authorId":3577938728188071,"author":{"id":3577938728188071,"authorId":3577938728188071,"name":"Melvin888","avatar":"https://static.tigerbbs.com/1f7e36200d6d8c6159f6d35c041d8e3e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":850496292,"type":1,"supId":0,"prevId":0,"content":"Yeah!","text":"Yeah!","html":"Yeah!"},{"id":6249678,"gmtCreate":1634616312181,"gmtModify":1634631629428,"authorId":4093155446796620,"author":{"id":4093155446796620,"authorId":4093155446796620,"name":"Hougang","avatar":"https://static.tigerbbs.com/a1816899812984b51082a00bd7f96df1","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":850496292,"type":1,"supId":0,"prevId":0,"content":"[强]","text":"[强]","html":"[强]"}],"langContent":"CN"},{"id":850402076,"gmtCreate":1634613092546,"gmtModify":1634613092768,"author":{"id":"3582719067968878","authorId":"3582719067968878","authorIdStr":"3582719067968878","name":"Nyannie","avatar":"https://static.tigerbbs.com/e49d49ced16baf68b59df813f08820a8","vip":1,"crmLevel":1,"crmLevelSwitch":0,"idStr":"3582719067968878"},"htmlText":"Good","listText":"Good","text":"Good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/850402076","repostId":1175707103,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6249168,"gmtCreate":1634613098878,"gmtModify":1634631670212,"authorId":3582719067968878,"author":{"id":3582719067968878,"authorId":3582719067968878,"name":"Nyannie","avatar":"https://static.tigerbbs.com/e49d49ced16baf68b59df813f08820a8","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":850402076,"type":1,"supId":0,"prevId":0,"content":"Mice","text":"Mice","html":"Mice"}],"langContent":"CN"},{"id":850548284,"gmtCreate":1634611184812,"gmtModify":1634611236488,"author":{"id":"3581636635898281","authorId":"3581636635898281","authorIdStr":"3581636635898281","name":"pekss","avatar":"https://static.tigerbbs.com/7dfef98c44b3810cffef7f3eb78524ba","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3581636635898281"},"htmlText":"I feel that AAPL is now more a value play than growth play, as gone are its days of exponential growth.","listText":"I feel that AAPL is now more a value play than growth play, as gone are its days of exponential growth.","text":"I feel that AAPL is now more a value play than growth play, as gone are its days of exponential growth.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":2,"repostSize":0,"link":"https://laohu8.com/post/850548284","repostId":1175707103,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6262627,"gmtCreate":1634710516426,"gmtModify":1634710516471,"authorId":3581817256198016,"author":{"id":3581817256198016,"authorId":3581817256198016,"name":"evepek","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":850548284,"type":1,"supId":0,"prevId":0,"content":"Yes","text":"Yes","html":"Yes"},{"id":6249297,"gmtCreate":1634614112993,"gmtModify":1634631662142,"authorId":4091088321144510,"author":{"id":4091088321144510,"authorId":4091088321144510,"name":"JunHaoT","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":850548284,"type":1,"supId":0,"prevId":0,"content":"Still can grow, but need another revolution product. Anyway is a cash cow, because of its&nbsp; ecosystem.","text":"Still can grow, but need another revolution product. Anyway is a cash cow, because of its&nbsp; ecosystem.","html":"Still can grow, but need another revolution product. Anyway is a cash cow, because of its&nbsp; ecosystem."}],"langContent":"CN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":56,"commentSize":9,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.28.1","shortVersion":"4.28.1","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1175707103"}