Apple Inc.

By: Tyler Haida

Frankie Damian
Honglu Liu
Presented March 13, 2012

AGENDA

Industry Overview
Competitors Analysis
Company Overview
Modeling
Recommendation

Industry Analysis
Consumer Electronics Industry is very competitive
Products can be looked at as a luxury and not a
necessity.
Demand is driven by the desire of the product
not the need
Demand for Apple products is expected to
continue to grow rapidly

Competitors
Google (GOOG)
o Market cap. 196.76 Billion

Hewlett-Packard (HPQ)
o Market cap. 47.62 Billion

Research in Motion (RIMM)

o Market cap. 6.76 Billion

Dell (DELL)
o Market cap. 30.15 Billion

Amazon (AMZN)
o Market cap. 83.45 Billion

Source: Yahoo! Finance

Competitors Products
Company

Phones

Computers

Tablets

Digital Music
Players

AAPL

Yes

Yes

Yes

Yes

GOOG

Yes, kind of

No

Yes, kind of

No

HPQ

No

Yes

No

No

RIMM

Yes

No

Yes

DELL

No

Yes

Yes

No

AMZN

No

No

Yes

No

MMI

Yes

No

Yes

No

Competitors Key Statistics

Company

Revenue

P/E

R.O.A.

EPS

AAPL

127.84 Billion

15.71

24.01%

35.17

GOOG

37.9 Billion

20.33

11.73%

29.76

HPQ

124.98 Billion

8.41

5.34%

2.86

RIMM

19.80 Billion

3.09

14.36%

4.25

DELL

62.07 Billion

9.02

6.74%

1.88

AMZN

48.08 Billion

133.86

2.44%

1.37

MMI

13.06 Billion

N/A

-.06%

-.84
Source: Yahoo! Finance

COMPANY OVERVIEW
Apple Inc. (NASDAQ:AAPL) is a multinational
corporation that designs, manufactures and
markets personal computers, software,
electronics and other creative devices.

Key Statistics

Current Price $552.00

Market Capitalization 514.67 Billion
P/E 15.71
EPS 35.14
P.E.G. 0.66
R.O.A 24.01%
R.O.E 45.58%
5 yr. Annualized HPR 137%

Source: Yahoo! Finance

PRODUCTS
iPhone
iPad
Mac Hardware Products
o Desktop computers: iMac, Mac Pro and Mac mini
o Portable computers: MacBook Pro and MacBook
Air

iPod
o Touch; Nano; Shuffle; Classic
iTunes + iTunes Store
Mac App Store
Software Products and Computer Technologies
iCloud
Source: Apple 10-K (2011)

iPhone

iPad

iPod

MacBooks

Mac Desktops

Apple TV

Data Source: Apple 10-K (2011)

BASIC FINANCIAL DATA

Source: Bloomberg

BASIC FINANCIAL DATA

Source: Bloomberg

HISTORICAL STOCK PRICE

Source: Bloomberg

20 Day vs. 200 Day Moving Average

Source: Yahoo! Finance

New Products???
Apple Television
o display monitor or screen would be more fitting.

Apple Game Counsel

o Epic Games, CEO Mike Capps spoke of the possibility of a Bluetooth
controller being developed for the iPad. With a hypothetical controller
combined with AirPlay and an Apple TV, he believes Apple could
challenge Microsoft's Xbox and Sony's PlayStation platforms for the
home console gaming market.

Source: AppleInsider.com

Key Risk Factors

Global Economic Conditions
Highly competitive global market subject to rapid
technological change
o Wide Moat

Must successfully manage frequent product

introductions and transitions
Operating results depend on Apples ability to
obtain components in sufficient quantity
Depend on outsourcing, many outside the U.S.
Relies on third-party intellectual property and
digital content

The Apple Moat

Huge Market Share?
Industry

Market Cap. of
Industry

Personal Computers

544.80 Billion

Internet Information
Providers (GOOG)
Diversified Computer
Systems
Catalog and Mail
Orders (AMZN)
Apple

196.76 Billion

Apples Hybrid
Industry Market
Share

293 Billion
149.1 Billion
514.67 Billion

43.48%
Source: Yahoo! Finance

Explaining the Hybrid Market

As we pointed out earlier Apple does NOT have a true
competitor
Not one company in the Technology industry competes
with Apple in all business segments.
So we created this Hybrid Industry to really try and put
Apples market share in perspective.
We took the market capitalization of all the industries of
Apples competitors and compared Apples Market Cap.
to this Hybrid industry instead off just the Personal
Computers Industry, which Apple clearly dominates.

The Moat Continued

Low-Cost Producer?
Apple outsources all of its production
o Because it can get it at a very low cost overseas.

Average 5 year Gross Margin of 40%

The Moat Continued

Patents, Copyrights, or Governmental Approvals
and Licenses?
Apple currently has 3.5 Billion Intangible Assets
o Typically are patents and copyrights

Very active in filing patents on new products

o Literally everything they make

They also peruse legal action

Apple is very secretive and protects its products

Source: Apple 10-K (2011)

The Moat Continued

Unique Corporate Culture?
o Just go into an Apple store
o It is no secret that the culture at Apple is very unique

High-Customer Switching Costs

o Apple doesn'tt necessarily have high switching costs but the way all of
the products integrate with each other makes it very convenient and
attractive to own more Apple products.

The Network Effect?

o This is created by being a first-mover in an emerging technology.
Because the networks value increases as more people use it, a
network is created that can create a massive moat.

So Apples Moat?
Morning Star classifies Apples moat as being
narrow
I say its bigger. moderate or even wide

Graham-Greenblatt
1 year Earnings Growth 35.17%
Graham
o 7-10 year growth 347%

Greenblatt
o
o
o
o
o

APPL=353.7%
GOOG=46.37%
RIMM=148.26%
HPQ=81.81%
DELL=42.19%

Competitors Graham-Greenblatt
Company

1 yr. EPS Growth

Graham

Greenblatt

AAPL

35.17%

347%

353.3%

GOOG

66.67%

6.21%

46.37%

HPQ

55.58%

.21%

81.81%

RIMM

32.11%

2.65%

148.26%

DELL

15.95%

.26%

42.19%

Source: Yahoo! Finance

Recommendation
BUY 100 shares at the market.
Will have to get permission because it will exceed
the limit of 2.5% of initial position.