Apple just published its financial results for the
quarter ending March 31st , 2013.
As expected, the gross margin has shrunk to a more reasonable 37.5% and
the company expects that, in the short term, it may drop further to 36%-37%. Net cash and equivalents stood at close to
$145 billion, or almost $153/share on a fully diluted basis.
New products have been announced for the end of this
year and for next. Despite its lack of cheap
iPhones and not having signed up China Mobile, Apple did rather well in China.
Significantly, its CEO Tim Cook acknowledged that
the days of rocket-like growth were over but not those of product innovation. In this context, he announced a 15% dividend
increase and a more than doubling of the share repurchase program through 2015,
from $45 billion to $100 billion. Given
that only $10 billion of the initial approval have been used to date, it is
clear to us that the company is about to deploy a lot of fire power.
Where do we stand?
We continue to believe that the stock is undervalued, selling at a p/e
of 6 times estimated 2013 earnings ($44.5/sh), adjusting for net cash holdings. Pending the launch of new products, the price
target of $600/share that we suggested last March seems realistic. It reflects a p/e multiple of 10 times 2013 earnings
and $153 in net cash.
Apple’s current p/e multiple of 6 compares very
favorably with the Dow Jones’ and IBM’s[1]
which sell at over 14 times. While
Samsung Electronics also sports a low p/e multiple of about 6.5, its free cash
flows are much lower, be they measured against revenues or net profits[2]. As to gross margins, Samsung’s is below 30%,
again, significantly below Apple’s.
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