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- growfastergrowfaster
  ·2021-05-21
  wow//@Tachse:Well written article ?
  Buy Apple Before The Upcoming Breakout
  Summary Apple is consolidating in a bullish pattern. The weight of the evidence suggests an upside
  Buy Apple Before The Upcoming Breakout
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- growfastergrowfaster
  ·2021-05-18
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href=\"https://laohu8.com/U/3573597050937539\">@Tachse</a>:Well written article ?","listText":"wow//<a href=\"https://laohu8.com/U/3573597050937539\">@Tachse</a>:Well written article ?","text":"wow//@Tachse:Well written article ?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/130768954","repostId":"1156718320","repostType":4,"repost":{"id":"1156718320","pubTimestamp":1621407249,"share":"https://ttm.financial/m/news/1156718320?lang=&edition=fundamental","pubTime":"2021-05-19 14:54","market":"us","language":"en","title":"Buy Apple Before The Upcoming Breakout","url":"https://stock-news.laohu8.com/highlight/detail?id=1156718320","media":"seekingalpha","summary":"Summary\n\nApple is consolidating in a bullish pattern.\nThe weight of the evidence suggests an upside ","content":"<p><b>Summary</b></p>\n<ul>\n <li>Apple is consolidating in a bullish pattern.</li>\n <li>The weight of the evidence suggests an upside break, as well as rising EPS estimates.</li>\n <li>With the valuation at pre-pandemic levels, Apple is priced in the favor of the bulls.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/0970eb023499c61f67a4ece66a0caebc\" tg-width=\"1536\" tg-height=\"1041\" referrerpolicy=\"no-referrer\"><span>Photo by Justin Sullivan/Getty Images News via Getty Images</span></p>\n<p>Technology stocks, and particularly growth-oriented technology stocks, have been pummeled since February. Interest rates have been blamed and while that’s certainly part of it, there were signs of excessive valuations all over the place after a year of almost unbelievable gains. While this period of selling has been painful, it has also created opportunities.</p>\n<p>One such opportunity is in OG smartphone legend&nbsp;<b>Apple</b>&nbsp;(AAPL), a stock that has traded sideways since last September. Apple’s world-beating market capitalization means on a percentage basis, its growth must slow down. But I think the stock is underpricing the company’s potential, and that an upside breakout is coming.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/9651cd87ec3d2605b8580c3db46a3622\" tg-width=\"640\" tg-height=\"615\"><span>Source: StockCharts</span></p>\n<p>We’ll start with the daily chart, and while the picture is somewhat mixed, the most recent period of consolidation has worked off any overbought conditions that may have existed prior, and it certainly looks to me like Apple is ready to break out to the upside.</p>\n<p>I’ve drawn an upward-sloping trendline that has provided excellent support for the stock since the relative bottom that occurred in September. This line has been tested a handful of times and has held without fail; the stock just bounced off of it again a few days ago. Until that line fails, you can trade it.</p>\n<p>Accumulation/distribution is one of my favorite indicators, but alas, it is roughly flat in this case, so it’s neutral.</p>\n<p>What is more bullish are the momentum indicators, the PPO, and the 14-day RSI. The PPO has returned to centerline support and – very importantly – has begun bouncing. If a new rally in Apple is to begin, this space on the PPO line is most likely the point where it would originate.</p>\n<p>Likewise, the stock has reached ~30 on the 14-day RSI three times since February, and while this most recent bout of selling didn’t quite get there, you can see the stock is bouncing from roughly the same spot again.</p>\n<p>All in all, the chart looks like a stock that is ready to bounce and do so as part of a larger upward-sloping move that is consolidating prior gains. To get a better look at that piece of the puzzle, let’s turn our attention to the weekly chart.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c6aec1317cbceb65a6908358c22ddf0a\" tg-width=\"640\" tg-height=\"615\"><span>Source: StockCharts</span></p>\n<p>The weekly chart has some of the same characteristics as the daily chart – including a flattish accumulation/distribution line – but some important differences as well.</p>\n<p>I’ve annotated what I believe is a bullish ascending triangle on the weekly chart, a continuation pattern which generally resolves itself to the upside. The only thing that would break this pattern prematurely is a sustained break of the lower line. Unless that happens, watch for the stock to follow the pattern until it achieves a sustained breakout over the flat line above.</p>\n<p>The weekly PPO was showing extreme overbought conditions last September when the first stab at $137 was made by the bulls and has pulled well back very near centerline support. The last time this happened was during the worst of the pandemic-induced selling last year, and I fully expect the stock to turn higher from here, or very close to it.</p>\n<p>Finally, the 14-week RSI is showing a return to centerline support as well, an area that has held for a long time, excluding the initial stages of pandemic selling in March of last year.</p>\n<p>The point of all of this is to show that Apple – despite its months-long consolidation – is setting up for a renewed rally, and not setting up for a breakdown. From a technical perspective, I am very bullish on Apple, even if it requires some patience for the factors I’ve discussed to play out. Over time, however, this stock is going higher.</p>\n<p><b>Upward revisions drive the share price</b></p>\n<p>One thing I always look for when picking a stock is that earnings and revenue revisions should be upward-sloping. For growth stocks, this is paramount as the moment these revisions turn negative, the share price often follows. Apple is no longer a pure growth stock given its $2+ trillion valuation, but I think there is growth left in the tank, and that the current share price is undervaluing it.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/97080913a4dcaf1197d3ffa6fdc441b8\" tg-width=\"640\" tg-height=\"289\"><span>Source:Seeking Alpha</span></p>\n<p>Revenue revisions have been extremely bullish in recent months, with revenue for this year, for instance, rising from $296 billion to $354 billion in the space of a year. The story is the same for the out-years in varying degrees, but the point is that Apple’s revenue continues to move up and to the right, which is unequivocally bullish. It means the company continues to outperform and that the investment community is chasing targets higher. Keep in mind also that for about half of that period, the stock has been treading water, all the while becoming cheaper as estimates rise on a flat share price; more on that in a bit.</p>\n<p>Product sales continue to drive the top line higher, and that will almost certainly continue to be the case as the iPhone remains a favorite among the world’s consumers and businesses. But apart from that, the company’s services revenue continues to move significantly higher, and produce outstanding margins too.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/7c13cc8b6877717de7ab03a830f1fe03\" tg-width=\"640\" tg-height=\"221\"><span>Source:Q1 earnings release</span></p>\n<p>We all know about Apple’s products and where its services revenue comes from, so I won’t needlessly explain. However, the point is that the upward revisions we saw in revenue above are being driven by devices that get customers to then use the company’s services, which produces an ever-higher value per customer. And while margins are decent on products – 36% in the most recent quarter – they are tremendous on services, which clocked gross margin of 70% in the same period. This is where profit growth is likely to come from in earnest in the decades to come as Apple continues to enhance its services offerings to the benefit of the bottom line.</p>\n<p>Now, let’s take a look at earnings estimates to figure out what we should pay for the stock, and what it may be worth.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/43809254a757d8529f7a8b62ce380996\" tg-width=\"522\" tg-height=\"226\"><span>Source:Seeking Alpha</span></p>\n<p>EPS is moving significantly higher this year on pent-up demand from the pandemic. The reason the stock has been consolidating for months is because market participants knew some time ago that this year would be gangbusters for Apple, and bid the stock up accordingly. That makes growth in the out-years more challenging as the base has soared, and that’s why current estimates for growth in the next couple of years are hardly befitting one of history’s best growth stories.</p>\n<p>However, I think the current level of estimates is too low, not only because analysts have consistently underestimated Apple’s earnings power – as evidenced by the revisions chart above – but because the factors that drive earnings should produce better than ~3% growth, which is a very low bar.</p>\n<p>When looking at EPS growth potential, there are essentially three factors to consider. One way a company can grow EPS is to expand its revenue. A second is to create better margins on its revenue, and the final way is to reduce the float. The combination of these factors is what makes up total EPS growth, and as we’ll see now, I think Apple is being undersold by current estimates.</p>\n<p>Revenue&nbsp;is expected to grow at ~4% for the next two years, followed by much better performances in the out-years. That’s<i>after</i>a 29% gain slated for this fiscal year, so we needn’t worry about the company’s ability to generate top line growth, particularly with plenty of disposable income in the hands of consumers.</p>\n<p>Second, and the least enticing growth lever in my view, is margins. Below is a look at gross margins and SG&amp;A costs, the combination of which produces operating margins.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/28d6d82216e7cca5c81cdbac72db1bc9\" tg-width=\"640\" tg-height=\"165\"><span>Source:TIKR.com</span></p>\n<p>While Apple has seen incremental improvements in margins over the years, I expect EPS expansion from margins to be minimal, and will be dependent upon what share of revenue services takes. My base case is for margin expansion to add about 1% to the EPS growth rate, with a more bullish scenario seeing it add 2%. For now, I’ll assume 1% and add that to the 4% we had from revenue.</p>\n<p>The final piece of the EPS puzzle is the share count, which we can see below for the past few years.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/fa1fa7d8926b3343e1f7b056603a5cb5\" tg-width=\"640\" tg-height=\"360\"><span>Source:TIKR.com</span></p>\n<p>Apple has been spending heavily on share repurchases for years under the guidance of Tim Cook, and it shows. The share count has fallen steadily and will continue to do so, with Apple adding$90 billionto its allotment in the most recent earnings. That’s good for ~4% of the float annually and while Apple issues shares as compensation, we can still very easily expect 3%+ in EPS tailwinds from the buyback alone at this run rate.</p>\n<p>In addition, as we can see below, Apple has been spending tens of billions of dollars on repurchases for years, and with its ever-growing free cash flow, there is no reason to think it won’t continue to see higher totals.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/b3d3bffb48929c9a9ca2b1019a121a64\" tg-width=\"640\" tg-height=\"165\"><span>Source:TIKR.com</span></p>\n<p>This trailing-twelve-months view gives us an idea of just how consistently (and how much) Apple believes its own stock is worth investing in, and I fully expect Apple to hit $100 billion in annual share repurchases in the not-too-distant future.</p>\n<p>How? It has very little capex but very large operating cash flows, which are the components of FCF.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/6e55bdb4bffd7e2b252e42281085f2f2\" tg-width=\"640\" tg-height=\"170\"><span>Source:TIKR.com</span></p>\n<p>Capex is less than $9 billion (TTM shown above), while operating cash flow hit $99.6 billion on a TTM basis in the most recent quarter. That gives Apple freedom to do pretty much whatever it wants, and remember that this total is much more likely to grow over time than shrink. The dividend is ~$15 billion annually today, so that still leaves $80+ billion in cash Apple can do as it sees fit with. That creates a long-term tailwind to EPS as the company literally has more cash than it can profitably invest in the business (#firstworldproblems).</p>\n<p>And despite this otherworldly spending on buybacks, Apple’s balance sheet is still outstanding.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/74cde7d87b3563aa70bccd4bb5c9318e\" tg-width=\"640\" tg-height=\"360\"><span>Source:TIKR.com</span></p>\n<p>Net debt has risen in recent years as the company has returned hundreds of billions of dollars to shareholders and taken on some debt, but on a net basis, debt is still -$70 billion. That means the company can continue to borrow at very low rates if it pleases, and the hurdle rate for the investment of those proceeds is very low. Many companies take on massive amounts of leverage to buy back stock, but Apple has done no such thing, and has a huge runway left on its balance sheet for the years to come.</p>\n<p>The net of all of this is that analysts continue to chase Apple’s actual performance higher.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/42b94de356302d5a8ab101cacaece504\" tg-width=\"640\" tg-height=\"284\"><span>Source:Seeking Alpha</span></p>\n<p>The story here is exactly the same as the revenue conversation so I won’t belabor it, but just have a look at those revisions. Perhaps the only thing more bullish than that chart is the table below.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/e7472343ce11c52c702c4e86ee55b740\" tg-width=\"453\" tg-height=\"111\"><span>Source:Seeking Alpha</span></p>\n<p>Analysts have made 31 revisions in the past three months, and<i>100%</i>of them were bullish. I’ve personally never seen such a one-sided revision cycle, and if you cannot find bullishness in this, you should check your pulse.</p>\n<p>The bottom line on EPS is that I think we could easily see a 4% tailwind from revenue, a 1% tailwind from margins, and a further 3% from the buyback, all as base cases. That comes to ~8% EPS growth in lean times, which is about 2X what analysts are currently forecasting for 2022 and 2023. If I’m right, the revisions will continue to rise and with it, the share price.</p>\n<p><b>Let’s value this thing</b></p>\n<p>All of this counts for nothing if Apple is priced for the moon, so let’s take a look at how the valuation is faring these days. Below I’ve plotted forward price-to-earnings for the past five years to give us an idea of what’s going on with the valuation.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/a09a6e8a86ce76f73fd21a038082af99\" tg-width=\"640\" tg-height=\"193\"><span>Source:TIKR.com</span></p>\n<p>There is no doubt the valuation has come up a bunch since the post-pandemic rally began. However, Apple’s first shot at a new all-time high last September was accompanied by a high in the valuation at 37X forward earnings. Today, shares go for a much more reasonable 25X forward earnings, which just so happens to be where the stock was trading just prior to the pandemic hitting. In other words, for all the upward revisions we’ve seen, and Apple slated to post a 50%+ gain in EPS this year, the stock is priced exactly the same way it was before the world knew what COVID-19 was. To me, that screams value and with a base case of 8% EPS growth, a dominant market position (to say the least), virtually unlimited cash coming in at any time, and a history of profitable innovation, I think the risk/reward is firmly in favor of the bulls.</p>\n<p>Apple won’t make you rich overnight, but for growth at a reasonable price, it is very difficult to beat.</p>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Buy Apple Before The Upcoming Breakout</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBuy Apple Before The Upcoming Breakout\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-05-19 14:54 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4429656-buy-apple-before-the-upcoming-breakout><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nApple is consolidating in a bullish pattern.\nThe weight of the evidence suggests an upside break, as well as rising EPS estimates.\nWith the valuation at pre-pandemic levels, Apple is priced ...</p>\n\n<a href=\"https://seekingalpha.com/article/4429656-buy-apple-before-the-upcoming-breakout\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{},"source_url":"https://seekingalpha.com/article/4429656-buy-apple-before-the-upcoming-breakout","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1156718320","content_text":"Summary\n\nApple is consolidating in a bullish pattern.\nThe weight of the evidence suggests an upside break, as well as rising EPS estimates.\nWith the valuation at pre-pandemic levels, Apple is priced in the favor of the bulls.\n\nPhoto by Justin Sullivan/Getty Images News via Getty Images\nTechnology stocks, and particularly growth-oriented technology stocks, have been pummeled since February. Interest rates have been blamed and while that’s certainly part of it, there were signs of excessive valuations all over the place after a year of almost unbelievable gains. While this period of selling has been painful, it has also created opportunities.\nOne such opportunity is in OG smartphone legend Apple (AAPL), a stock that has traded sideways since last September. Apple’s world-beating market capitalization means on a percentage basis, its growth must slow down. But I think the stock is underpricing the company’s potential, and that an upside breakout is coming.\nSource: StockCharts\nWe’ll start with the daily chart, and while the picture is somewhat mixed, the most recent period of consolidation has worked off any overbought conditions that may have existed prior, and it certainly looks to me like Apple is ready to break out to the upside.\nI’ve drawn an upward-sloping trendline that has provided excellent support for the stock since the relative bottom that occurred in September. This line has been tested a handful of times and has held without fail; the stock just bounced off of it again a few days ago. Until that line fails, you can trade it.\nAccumulation/distribution is one of my favorite indicators, but alas, it is roughly flat in this case, so it’s neutral.\nWhat is more bullish are the momentum indicators, the PPO, and the 14-day RSI. The PPO has returned to centerline support and – very importantly – has begun bouncing. If a new rally in Apple is to begin, this space on the PPO line is most likely the point where it would originate.\nLikewise, the stock has reached ~30 on the 14-day RSI three times since February, and while this most recent bout of selling didn’t quite get there, you can see the stock is bouncing from roughly the same spot again.\nAll in all, the chart looks like a stock that is ready to bounce and do so as part of a larger upward-sloping move that is consolidating prior gains. To get a better look at that piece of the puzzle, let’s turn our attention to the weekly chart.\nSource: StockCharts\nThe weekly chart has some of the same characteristics as the daily chart – including a flattish accumulation/distribution line – but some important differences as well.\nI’ve annotated what I believe is a bullish ascending triangle on the weekly chart, a continuation pattern which generally resolves itself to the upside. The only thing that would break this pattern prematurely is a sustained break of the lower line. Unless that happens, watch for the stock to follow the pattern until it achieves a sustained breakout over the flat line above.\nThe weekly PPO was showing extreme overbought conditions last September when the first stab at $137 was made by the bulls and has pulled well back very near centerline support. The last time this happened was during the worst of the pandemic-induced selling last year, and I fully expect the stock to turn higher from here, or very close to it.\nFinally, the 14-week RSI is showing a return to centerline support as well, an area that has held for a long time, excluding the initial stages of pandemic selling in March of last year.\nThe point of all of this is to show that Apple – despite its months-long consolidation – is setting up for a renewed rally, and not setting up for a breakdown. From a technical perspective, I am very bullish on Apple, even if it requires some patience for the factors I’ve discussed to play out. Over time, however, this stock is going higher.\nUpward revisions drive the share price\nOne thing I always look for when picking a stock is that earnings and revenue revisions should be upward-sloping. For growth stocks, this is paramount as the moment these revisions turn negative, the share price often follows. Apple is no longer a pure growth stock given its $2+ trillion valuation, but I think there is growth left in the tank, and that the current share price is undervaluing it.\nSource:Seeking Alpha\nRevenue revisions have been extremely bullish in recent months, with revenue for this year, for instance, rising from $296 billion to $354 billion in the space of a year. The story is the same for the out-years in varying degrees, but the point is that Apple’s revenue continues to move up and to the right, which is unequivocally bullish. It means the company continues to outperform and that the investment community is chasing targets higher. Keep in mind also that for about half of that period, the stock has been treading water, all the while becoming cheaper as estimates rise on a flat share price; more on that in a bit.\nProduct sales continue to drive the top line higher, and that will almost certainly continue to be the case as the iPhone remains a favorite among the world’s consumers and businesses. But apart from that, the company’s services revenue continues to move significantly higher, and produce outstanding margins too.\nSource:Q1 earnings release\nWe all know about Apple’s products and where its services revenue comes from, so I won’t needlessly explain. However, the point is that the upward revisions we saw in revenue above are being driven by devices that get customers to then use the company’s services, which produces an ever-higher value per customer. And while margins are decent on products – 36% in the most recent quarter – they are tremendous on services, which clocked gross margin of 70% in the same period. This is where profit growth is likely to come from in earnest in the decades to come as Apple continues to enhance its services offerings to the benefit of the bottom line.\nNow, let’s take a look at earnings estimates to figure out what we should pay for the stock, and what it may be worth.\nSource:Seeking Alpha\nEPS is moving significantly higher this year on pent-up demand from the pandemic. The reason the stock has been consolidating for months is because market participants knew some time ago that this year would be gangbusters for Apple, and bid the stock up accordingly. That makes growth in the out-years more challenging as the base has soared, and that’s why current estimates for growth in the next couple of years are hardly befitting one of history’s best growth stories.\nHowever, I think the current level of estimates is too low, not only because analysts have consistently underestimated Apple’s earnings power – as evidenced by the revisions chart above – but because the factors that drive earnings should produce better than ~3% growth, which is a very low bar.\nWhen looking at EPS growth potential, there are essentially three factors to consider. One way a company can grow EPS is to expand its revenue. A second is to create better margins on its revenue, and the final way is to reduce the float. The combination of these factors is what makes up total EPS growth, and as we’ll see now, I think Apple is being undersold by current estimates.\nRevenue is expected to grow at ~4% for the next two years, followed by much better performances in the out-years. That’saftera 29% gain slated for this fiscal year, so we needn’t worry about the company’s ability to generate top line growth, particularly with plenty of disposable income in the hands of consumers.\nSecond, and the least enticing growth lever in my view, is margins. Below is a look at gross margins and SG&A costs, the combination of which produces operating margins.\nSource:TIKR.com\nWhile Apple has seen incremental improvements in margins over the years, I expect EPS expansion from margins to be minimal, and will be dependent upon what share of revenue services takes. My base case is for margin expansion to add about 1% to the EPS growth rate, with a more bullish scenario seeing it add 2%. For now, I’ll assume 1% and add that to the 4% we had from revenue.\nThe final piece of the EPS puzzle is the share count, which we can see below for the past few years.\nSource:TIKR.com\nApple has been spending heavily on share repurchases for years under the guidance of Tim Cook, and it shows. The share count has fallen steadily and will continue to do so, with Apple adding$90 billionto its allotment in the most recent earnings. That’s good for ~4% of the float annually and while Apple issues shares as compensation, we can still very easily expect 3%+ in EPS tailwinds from the buyback alone at this run rate.\nIn addition, as we can see below, Apple has been spending tens of billions of dollars on repurchases for years, and with its ever-growing free cash flow, there is no reason to think it won’t continue to see higher totals.\nSource:TIKR.com\nThis trailing-twelve-months view gives us an idea of just how consistently (and how much) Apple believes its own stock is worth investing in, and I fully expect Apple to hit $100 billion in annual share repurchases in the not-too-distant future.\nHow? It has very little capex but very large operating cash flows, which are the components of FCF.\nSource:TIKR.com\nCapex is less than $9 billion (TTM shown above), while operating cash flow hit $99.6 billion on a TTM basis in the most recent quarter. That gives Apple freedom to do pretty much whatever it wants, and remember that this total is much more likely to grow over time than shrink. The dividend is ~$15 billion annually today, so that still leaves $80+ billion in cash Apple can do as it sees fit with. That creates a long-term tailwind to EPS as the company literally has more cash than it can profitably invest in the business (#firstworldproblems).\nAnd despite this otherworldly spending on buybacks, Apple’s balance sheet is still outstanding.\nSource:TIKR.com\nNet debt has risen in recent years as the company has returned hundreds of billions of dollars to shareholders and taken on some debt, but on a net basis, debt is still -$70 billion. That means the company can continue to borrow at very low rates if it pleases, and the hurdle rate for the investment of those proceeds is very low. Many companies take on massive amounts of leverage to buy back stock, but Apple has done no such thing, and has a huge runway left on its balance sheet for the years to come.\nThe net of all of this is that analysts continue to chase Apple’s actual performance higher.\nSource:Seeking Alpha\nThe story here is exactly the same as the revenue conversation so I won’t belabor it, but just have a look at those revisions. Perhaps the only thing more bullish than that chart is the table below.\nSource:Seeking Alpha\nAnalysts have made 31 revisions in the past three months, and100%of them were bullish. I’ve personally never seen such a one-sided revision cycle, and if you cannot find bullishness in this, you should check your pulse.\nThe bottom line on EPS is that I think we could easily see a 4% tailwind from revenue, a 1% tailwind from margins, and a further 3% from the buyback, all as base cases. That comes to ~8% EPS growth in lean times, which is about 2X what analysts are currently forecasting for 2022 and 2023. If I’m right, the revisions will continue to rise and with it, the share price.\nLet’s value this thing\nAll of this counts for nothing if Apple is priced for the moon, so let’s take a look at how the valuation is faring these days. Below I’ve plotted forward price-to-earnings for the past five years to give us an idea of what’s going on with the valuation.\nSource:TIKR.com\nThere is no doubt the valuation has come up a bunch since the post-pandemic rally began. However, Apple’s first shot at a new all-time high last September was accompanied by a high in the valuation at 37X forward earnings. Today, shares go for a much more reasonable 25X forward earnings, which just so happens to be where the stock was trading just prior to the pandemic hitting. In other words, for all the upward revisions we’ve seen, and Apple slated to post a 50%+ gain in EPS this year, the stock is priced exactly the same way it was before the world knew what COVID-19 was. To me, that screams value and with a base case of 8% EPS growth, a dominant market position (to say the least), virtually unlimited cash coming in at any time, and a history of profitable innovation, I think the risk/reward is firmly in favor of the bulls.\nApple won’t make you rich overnight, but for growth at a reasonable price, it is very difficult to beat.","news_type":1},"isVote":1,"tweetType":1,"viewCount":178,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":195723012,"gmtCreate":1621318037936,"gmtModify":1704355699957,"author":{"id":"3582010436655383","authorId":"3582010436655383","name":"growfaster","avatar":"https://static.laohu8.com/default-avatar.jpg","crmLevel":6,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3582010436655383","authorIdStr":"3582010436655383"},"themes":[],"htmlText":"post day 1","listText":"post day 1","text":"post day 1","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":4,"repostSize":0,"link":"https://ttm.financial/post/195723012","isVote":1,"tweetType":1,"viewCount":167,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"defaultTab":"followers","isTTM":true}