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1、January 24,2013COMPANY UPDATEApple Inc.(AAPL),BuyA tough setback,but the story is not brokenWhats changed,Investment Profile,Equity Research,Apple reported 1QFY2013 revenues of$54.51 billion,above our estimate of$53.56 billion and just below consensus of$54.73 billion.EPS of$13.81was above our estim
2、ate of$12.58 and consensus of$13.44.Gross marginsof 38.6%and operating margins of 31.6%were above our forecast of,LowGrowthReturns*MultipleVolatility,HighGrowthReturns*MultipleVolatility,37.0%and 29.4%.iPhone,iPad,and Mac units all fell slightly short of our,Percentile,20th,40th,60th,80th,100th,expe
3、ctations,although more resilient margins led to the slight EPS beat.Apples guidance was essentially what we expected from the typicallyconservative management team.The problem,and the keydisappointment in the call,was that management made it pretty clear that,Apple Inc.(AAPL)Americas Technology Peer
4、 Group Average*Returns=Return on Capital For a complete description of theinvestment profile measures please refer tothe disclosure section of this document.,it was moving towards providing more realistic guidance.In this case,theguidance was a definitive disappointment.Implications,Key dataPrice($)
5、12 month price target($)Market cap($mn),Current514.01660.00482,636.8,In the end,Apple clearly didnt perform as well as we had hoped.Whilethe iPhone product cycle was relatively robust in the December quarter,itclearly hasnt been able to deliver the upside that Apple investors havebeen accustomed to
6、and the post-holiday demand for the product appearsdisappointing as well.As a result of this quarters disappointment,we are,Revenue($mn)NewRevenue($mn)OldEPS($)NewEPS($)OldP/E(X)EV/EBITDA(X)ROE(%),9/12156,508.0156,508.044.1444.1411.68.342.8,9/13E182,982.3187,094.644.7047.5911.57.831.8,9/14E215,849.8
7、230,557.652.1060.799.96.829.8,9/15E245,737.8260,752.360.6867.888.56.027.9,lowering our 12-month price target and our FY2013-FY2015 revenue,estimates by 2-6%and our EPS estimates by 6-14%.Nevertheless,we are,12/12,3/13E,6/13E,9/13E,maintaining our CL-Buy due to our optimism that new products in the,E
8、PS($),13.81,10.16,10.21,10.51,coming months will reinvigorate new user growth,with a sticky installed,Price performance chart,base serving as a baseline for valuation support.ValuationWe are reducing our 12-month target price to$660 from$760.Our newtarget price is based on a 14X multiple(unchanged)o
9、n our new CY2013EPS estimate($47.13 from$54.54 prior).We reiterate our CL Buy.,750700650600550500450400,1,6001,5501,5001,4501,4001,3501,3001,250,Key risksDelayed product cycles,supply chain difficulties,product price erosion,Jan-12,Apr-12,Aug-12Apple Inc.(L),Nov-12S&P 500(R),and a slower pace of pro
10、duct innovation.,INVESTMENT LIST MEMBERSHIPAmericas Buy ListAmericas Conviction Buy ListGS SUSTAIN Focus ListCoverage View:NeutralBill Shope,CFA(212)902-6834 Goldman,Sachs&Co.Elizabeth Borbolla(212)357-4977 Goldman,Sachs&Co.Cristina Colon,CFA(212)902-9913 Goldman,Sachs&Co.Stephen Oshman(917)343-3128
11、 Goldman,Sachs&Co.The Goldman Sachs Group,Inc.,Share price performance(%)3 month 6 month 12 monthAbsolute(16.2)(14.9)20.3Rel.to S&P 500(20.8)(23.1)5.9Source:Company data,Goldman Sachs Research estimates,FactSet.Price as of 1/23/2013 close.Goldman Sachs does and seeks to do business with companiescov
12、ered in its research reports.As a result,investors should beaware that the firm may have a conflict of interest that couldaffect the objectivity of this report.Investors should considerthis report as only a single factor in making their investmentdecision.For Reg AC certification and other important
13、disclosures,see the Disclosure Appendix,or go Analysts employed by non-US affiliates are not registered/qualified as research analystswith FINRA in the U.S.Global Investment Research,2,January 24,2013Apple Inc.:Summary Financials,Apple Inc.(AAPL),Profit model($mn)Total revenueCost of goods soldSG&AR
14、&DOther operating profit/(expense)ESO expenseEBITDADepreciation&amortizationEBITNet interest income/(expense),9/12156,508.0(87,846.0)(10,040.0)(3,381.0)0.0-58,518.0(3,277.0)55,241.0522.0,9/13E182,982.3(111,304.8)(11,621.6)(4,093.1)0.0-59,863.3(3,900.5)55,962.81,162.0,9/14E215,849.8(130,762.2)(15,066
15、.2)(5,021.2)0.0-68,690.7(3,690.6)65,000.1520.0,9/15E245,737.8(150,195.5)(15,869.3)(5,146.9)0.0-78,725.0(4,199.0)74,526.0520.0,Balance sheet($mn)Cash&equivalentsAccounts receivableInventoryOther current assetsTotal current assetsNet PP&ENet intangiblesTotal investmentsOther long-term assetsTotal asse
16、ts,9/1210,746.010,930.0791.016,803.039,270.015,452.010,837.0110,505.00.0176,064.0,9/13E14,051.59,106.21,756.520,992.345,906.619,437.311,552.3140,292.90.0217,189.1,9/14E10,651.310,513.31,537.924,236.046,938.522,440.711,666.6181,466.30.0262,512.2,9/15E4,627.611,250.92,323.723,955.142,157.325,349.311,7
17、82.1236,591.90.0315,880.6,Income/(loss)from associates,0.0,0.0,0.0,0.0,OthersPretax profitsProvision for taxesMinority interestNet income pre-preferred dividendsPreferred dividendsNet income(pre-exceptionals)Post tax exceptionals,0.055,763.0(14,030.0)0.041,733.00.041,733.00.0,0.057,124.8(14,851.7)0.
18、042,273.10.042,273.10.0,0.065,520.1(16,380.0)0.049,140.10.049,140.10.0,0.075,046.0(18,011.1)0.057,035.00.057,035.00.0,Accounts payableShort-term debtOther current liabilitiesTotal current liabilitiesLong-term debtOther long-term liabilitiesTotal long-term liabilitiesTotal liabilities,21,175.00.017,3
19、67.038,542.00.019,312.019,312.057,854.0,23,677.20.020,994.944,672.00.025,141.425,141.469,813.4,28,989.30.023,757.352,746.60.027,048.327,048.379,794.9,32,849.50.026,751.559,600.90.030,291.430,291.489,892.3,Net income(post-exceptionals),41,733.0,42,273.1,49,140.1,57,035.0,Preferred shares,0.0,0.0,0.0,
20、0.0,EPS(basic,pre-except)($)EPS(diluted,pre-except)($),44.6444.14,45.0944.70,52.5652.10,61.2160.68,Total common equityMinority interest,118,210.00.0,147,375.70.0,182,717.30.0,225,988.30.0,EPS(basic,post-except)($),44.64,45.09,52.56,61.21,EPS(diluted,post-except)($),44.14,44.70,52.10,60.68,Total liab
21、ilities&equity,176,064.0,217,189.1,262,512.2,315,880.6,Common dividends paidDPS($),-2.65,-10.60,-10.60,-10.60,Dividend payout ratio(%),5.9,23.5,20.2,17.3,Additional financials,9/12,9/13E,9/14E,9/15E,Net debt/equity(%)Interest cover(X),(9.1)NM,(9.5)NM,(5.8)NM,(2.0)NM,Growth&margins(%)Sales growthEBIT
22、DA growth,9/1244.664.4,9/13E16.92.3,9/14E18.014.7,9/15E13.814.6,Inventory daysReceivable daysBVPS($),3.319.0125.86,4.220.0157.32,4.616.6195.67,4.716.2242.78,EBIT growth,63.5,1.3,16.1,14.7,Net income(pre-except)growthEPS growth,61.059.2,1.31.0,16.216.6,16.116.5,ROA(%)CROCI(%),28.547.0,21.536.5,20.532
23、.2,19.733.8,Gross margin,43.9,39.2,39.4,38.9,EBITDA marginEBIT margin,37.435.3,32.730.6,31.830.1,32.030.3,Dupont ROE(%)Margin(%),35.326.7,28.723.1,26.922.8,25.223.2,Turnover(X),0.9,0.8,0.8,0.8,Cash flow statement($mn),9/12,9/13E,9/14E,9/15E,Leverage(X),1.5,1.5,1.4,1.4,Net income,41,733.0,42,273.1,49
24、,140.1,57,035.0,D&A add-back(incl.ESO)Minority interest add-back,3,277.00.0,3,900.50.0,3,690.60.0,4,199.00.0,Free cash flow per share($)Free cash flow yield(%),45.538.6,52.0210.1,56.9611.1,69.2813.5,Net(inc)/dec working capitalOther operating cash flowCash flow from operationsCapital expendituresAcq
25、uisitionsDivestituresOthersCash flow from investingDividends paid(common&pref)Inc/(dec)in debtOther financing cash flowsCash flow from financingTotal cash flow,1,084.04,762.050,856.0(8,295.0)(1,457.0)0.0(38,475.0)(48,227.0)(2,488.0)0.0790.0(1,698.0)931.0,2,798.99,840.258,812.7(10,039.9)(1,688.0)0.0(
26、30,116.9)(41,844.8)(10,008.4)0.0(3,654.0)(13,662.4)3,305.5,3,642.48,226.664,699.6(11,440.0)(1,688.0)0.0(41,173.4)(54,301.4)(9,998.5)0.0(3,800.0)(13,798.5)(3,400.2),5,611.910,732.277,578.1(13,024.1)(1,688.0)0.0(55,125.6)(69,837.7)(9,964.0)0.0(3,800.0)(13,764.0)(6,023.7),Note:Last actual year may incl
27、ude reported and estimated data.Source:Company data,Goldman Sachs Research estimates.Analyst Contributors,Bill Shope,CFA,Stephen O,Elizabeth BCristina Colon,CFAGoldman Sachs Global Investment Research,3,January 24,2013,Apple Inc.(AAPL),Overview:A tough setback,but the story is not brokenApple report
28、ed 1QFY2013 revenues of$54.51 billion,above our estimate of$53.56 billionand slightly below consensus of$54.73 billion(company guidance of$52 billion).EPScame in at$13.81,which was above our estimate of$12.58 and consensus of$13.44(company guidance of$11.75).Gross margins of 38.6%and operating margi
29、ns of 31.6%were above our forecast of 37.0%and 29.4%.iPhone,iPad,and Mac units all fell just shortof our expectations,with Macs being the greatest source of disappointment.Cash flow wasthe key positive surprise in the quarter,with cash from operations coming in at$23.43billion,versus our estimate of
30、$18.13 billion.Apple guided to March quarter revenues of between$41 billion and$43 billion,and themidpoint of guidance implies EPS of roughly$10.This compares with our prior forecast of$45.63 billion and$11.83,and consensus of$45.63 billion and$11.70.We had expected thehistorically conservative mana
31、gement team to guide to revenues of roughly$41 billion andEPS of at least$10,so on the surface,guidance was not surprising.The problem,and thekey disappointment from the earnings call,was that management made it fairly clear that itwas abandoning historical conservatism and guiding towards a more re
32、alistic range.In thiscase,the guidance was a definitive disappointment.This is likely to be a key focus forinvestors,particularly since the bear case has recently centered on concerns over theMarch quarter.Although CEO Tim Cook specifically noted that investors should not rely oncomponent order conj
33、ecture(clearly in reference to the iPhone and iPad order cuts recentlyreferenced by the press and the Street over the past month),in our view the guidance nowlends credence to the March quarter demand concerns.In the end,Apple clearly didnt perform as well as we had hoped.While the iPhone productcyc
34、le was relatively robust in the December quarter,it clearly hasnt been able to deliverthe upside that Apple investors have been accustomed to and the post-holiday demand forthe product appears disappointing as well.While we believe Apples existing customerbase remains fiercely loyal,in our view the
35、recent skepticism over Apples stock is unlikelyto fully abate until we see renewed evidence of Apples ability to innovate and continue toattract new users to its platform.As a result of this quarters disappointment,we arelowering estimates(see below for details)and our 12-month price target to$660,f
36、rom$760.Nevertheless,despite our disappointment,we are maintaining our CL-Buy for the followingkey reasons:The nature of Apples platform provides a baseline for cash flow and profitsthat typical hardware companies dont enjoy.We have consistently argued thatApples platform-centric business model adds
37、 significant switching costs for itscustomers,and this generates installed base loyalty that is generally atypical oftraditional hardware companies.This has been supported by extensive customersurveys we have conducted in the United States(Apple Inc.(AAPL):How resilientis the platform and what are t
38、he real risks?,June 29,2012)and in China(Apple Inc.(AAPL):How resilient is the platform?Part II:China,January 17,2013).Indeed,oursurvey revealed that 94%of the surveyed US Apple customers were likely orhighly likely to choose Apple for their next iPhone or iPad purchase,while 90%ofChinese consumers
39、fell into this category.This doesnt imply that Apples newuser growth will persist,as we have learned in recent quarters.Nevertheless,itdoes imply that the current installed base of approximately 344 million iOS usersis likely to come back to the platform on a consistent basis.For illustrativepurpose
40、s,if Apple maintains its average 2-year replacement cycle for iOS products,this would imply that a large percentage of the 218 million iOS units sold inCY2012 would recur in CY2014.As such,without any new users we would seecash flow exceed$50 billion in CY2014.Goldman Sachs Global Investment Researc
41、h,4,January 24,2013,Apple Inc.(AAPL),The companys momentum in emerging markets suggests new users are stillflooding the platform.Apple continues to see robust growth in emerging markets,and noted that its iPhone sales more than doubled in Greater China.In fact,overallGreater China revenue grew 67%an
42、nually,even with one less week from the yearago period.We view these stats as remarkable,particularly when considering thefact that Apple has increased sales in China from under$1.0 billion in FY2009 to$23.8 billion in FY2012.We continue to believe the companys success in China isin its early stages
43、 and serves as a template for future growth in other emergingregions.Furthermore,we believe this growth will see renewed momentum onceApple launches a low-cost version of the iPhone this year.The momentum in the story and concerns over competitive pressures canchange quickly with near-term product c
44、ycles and innovations we areanticipating.With Apples platform model providing a stable underlying source ofprofits and cash flow,in our view the key for the stock is to reignite new usergrowth.On this point,we expect a spate of new products to help reinvigorate newuser growth,and we expect many of t
45、hese products to appear within the first halfof this year.This includes a refreshed iPhone,a new iPad,and a lower cost iPhone.As we have seen with Apple many times in the past,one product cycle can quicklyreverse sentiment and market share momentum,and we believe this is highlypossible once again.Sh
46、orter product cycles could also minimize the volatility we saw last year andadd a key source of stabilization to the story.We believe that Apple has beensuffering from steadily increasing and extreme swings in seasonal volatilitybetween product cycles,with 2012 being a particularly acute example of
47、thisphenomenon.We continue to believe the company is solving this issue byshortening the iPhone product cycle in 2013,with two updates per year,as we sawwith the recent iPad refresh.We believe that shorter product cycles will help Applemanage the supply chain,which would see less extreme swings in q
48、uarterlyorders and order cuts,and also mitigate demand volatility as new products haveless time to become stale in the marketplace.Cash flow engine cant be ignored,and should allow value-oriented investorsto form a base for the stock.Apple posted surprising upside in cash flow thisquarter,with cash
49、from operations coming in at$23.43 billion,versus our estimateof$18.13 billion.Free cash flow came in at$21.1 billion.We believe that Applessizeable and loyal installed base will continue to produce large and predictablecash flows in the future,and this should help value investors provide a base for
50、the stock.Combined with Apples relatively newly instituted capital allocation plan,the sizeable cash flows(we now estimate$58.81 billion in CFO in FY2013 and$48.77 billion in FCF),and an already significant cash balance of$137 billion(or$146.03 in cash per share)should help drive shares higher over
