My analysis of Apple is relatively rough and ready, but I believe a great level of detail is not required given the simple balance sheet and huge gap between the estimate ($537) and the current share price ($390). The key assumptions are as follows:
- 4Q11 revenue identical to that reported in 3Q11. Year-on-year revenue growth in each year thereafter of 20%, 15%, 10%, 7.5%, 5%, 5%, 5%.
- 40% gross margins for FY11 (currently 41% after three quarters), declining to 36% by FY18.
- SG&A and R&D to remain constant as a proportion of revenues.
- Tax rate to remain constant.
- No interest earned on cash balance (for simplicity).
- No borrowings, no dividends, no acquisitions, no disposals.
- Cost of equity capital of 10%.
- A terminal growth rate of 2% per annum.