Apple's a Buy Under $150

With the release of Apple’s (AAPL) latest quarterly results the share price headed to the $150 a share range in after-hours trading. Valuecruncher did a valuation for Apple in early June that put a base case valuation on AAPL of $146.70 – 21% below the then share price of $186.10. With AAPL moving into the range of our previous valuation, we decided to review our valuation using the Valuecruncher on-line valuation tool.

Apple (AAPL) Valuation Assumptions

Our assumptions are revenues of $32.8 billion in 2008 growing to $50.0 billion in 2010. We have used a flat EBITDA margin of 21% from 2008. We used a terminal growth rate of 5.75%. We used a terminal capital expenditure number of $1.0 billion. We have used a WACC (discount rate) of 11.0%.

• Valuecruncher valuation model of Apple with interactive assumptions

Our valuation comes out at $149.75 per share. This is in-line with the current share price.

Our analysis incorporates the cash on the Apple balance sheet – Valuecruncher calculates a net debt number.

Apple is a great company with incredibly innovative products that consumers all around the world want desperately. That is a position that must be envied by all their competitors in the technology space and beyond.

Warren Buffett’s famous quote is “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”  At around $150 a share, in our view, Apple fits that criteria. Play with our assumptions – what does your analysis say?

Disclosure: None

Comments

[win]

I guess other people felt similarly. Wonder if Apple will come down to 149.75 again.

[Partners inGrime]

Anything's possible.