During the second half of December, AAPL shares experienced quite the wild ride. Shares declined from $145 to a low of about $125. Based on today’s $131 closing price, shares are down 28% from all-time highs put in January 2022.
Given share price volatility, it’s a good to revisit AAPL valuation metrics. It’s been a few months since we talked about the topic…
Here are selected forward P/E ratios for sectors / industries that have some connection to Apple.
* Application Software: 25x
* Consumer Discretionary: 21x
* Consumer Staples: 21x
* Apple: 20x
* Apparel, Accessories, & Luxury Goods: 11x
The market has been willing to price AAPL shares at an 18x to 19x forward P/E multiple in a higher interest rate / recessionary environment while a multiple closer to 30x was possible without macro issues…
Here is Apple FCF (Cash generated by operating activities – Payments for acquisition of property, plant and equipment):
* FY1Q22: $44B
* 2Q22: $25B
* 3Q22: $21B
* 4Q22: $21B
* Total (TTM): $111B
Apple’s current enterprise value (market cap + debt – cash) is $2.0 trillion. Taking those EV and FCF totals, we obtain Apple’s EV/FCF multiple: 18x. This is down significantly from the 25x multiple seen last summer and the 28x multiple seen roughly 12 months ago. Said another way, Apple shares have become notably less expensive on a free cash flow basis.
From Neil Cybart’s Above Avalon newsletter (paid).
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