APPLE stock valuation

APPLE stock valuation

Business description

Apple is an American worldwide innovation corporation located in California, which manufactures, strategies, and markets buyer goods, computer programs, and internet facilities. The corporation’s electronics devices include all the iPhone mobile, the free iPhone processer, the Mac home processor, the iPod personal broadcasting entertainer, the Smartwatch smartwatch, the Apple TV digital video playmaker, and the Google Home mobile. Apple apps cover Mac Operating System, iOS, iPad Operating System, watches, and TV Operating System software, Functioning devices, iTunes video entertainer, Search network browser, Shazam audio signature utility, life, and iWork creative and efficiency packages. It was founded as Apple phone, Inc., in January the year 1977, and the revenues of its machines, especially Apple II, increased rapidly. In limited years, the manager had employed computer programmers and had a factory line. In 1980, Apple became famous for its immediate monetary achievement. In the next few years (Lordan, 2019), Apple has delivered new machines incorporating groundbreaking user interface designs, including the initial Macintosh in the year 1984, and Apple’s promotion ads for all its products have gained generally positive reviews.

Nevertheless, the high cost of its items and the limited library of applications caused problems, as did conflicts amongst managers. Wozniak quit Apple-friendly in 1985 and stayed an honored employee, whereas Jobs and many others retired to the launch of the next.

As the home computer sector grew and progressed over the 1990s, Apple entered the market to the low-priced oligopoly of Operating systems on Intel PC copies. The Company hired the CEO on a 500-day push to reintegrate the highly indebted organization by transforming it with reductions, corporate change, and product development. In 1997, he directed Apple to purchase NeXT, fix the hopelessly ineffective software plan, and bring jobs back. Jobs recovered its management status in a proactive way, became CEO in the year 2000. Apple soon returned to growth as part of the revitalization program Think differently, as it restored Apple’s image by introducing the iMac in 1998, launching the Apple Shops retail business in 2001. In Jan the year 2007, Jobs changed Apple Inc., indicating its shift of focus to consumer products, and released the iPhone to proper critical recognition and business success (Paam, 2019). Jobs withdrew as CEO in August year 2011 due to healthiness difficulties, and Tim Cook was the new chairman. Two months, Jobs disappeared, following the finish of the business era. In June year 2019, Apple’s CDO, quit the Company to set up his new business but said that he could remain with Apple as his primary customer.

Industry overview and competitive positioning

The corporation is dedicated to providing learners, teachers, business professionals, companies, government entities, and customers with the best professional technology and music experiences via its groundbreaking hardware, applications, devices, services, and Web services. The Company’s operations plan optimizes its rare ability via the design and production of its OS, hardware, and other software applications and innovations, to introduce new goods and changes to its consumers with outstanding simplicity of use, tight integration, and creative product design.

Apple Inc is among the world’s biggest corporations and is primarily engaged in the manufacture and sale of personal computers, computer software as well as other internet services. It is a multinational corporation that started in the USA of Florida. The creators of the organization are globally-renowned. Apple began producing and selling home computers, but it has now grown to a variety of markets. Currently (October 2018), after Samsung company, Apple is the second biggest handset producer in the world. In reality, Apple Inc is the most significant IT corporation (by income) in the globe. It runs almost 500 retail outlets globally and hires about 120,000 employees.

Purpose and methodology

This study aims to include an evaluation of the portfolio of Apple, Inc. that will be used to make investment decisions. The Purchased Dividend model is used as the main framework for the study. The Discount Dividend model measures the value of the shares on both the basis of the potential dividends sequence. The dividend of Apple, Inc., has been gradually rising over the measured span of 6 years. It has been thus believed that the dividend payments would continue to increase in future years. Data on the stock price and dividends will also be extracted from Google finance and the Company’s financial reports.

Valuation

Valuation as per the Gordon economic growth includes the estimation of the infinite growth rate at which earnings will rise in the forecast. For this reason, data on the real dividend has also been obtained for the period from 2014 to 2020. On aggregate, yearly dividends tended to have risen by 15.05 percent. The approach also calls for the calculation of the persistent expense of equity. The corresponding equation established by the asset pricing system has been used to measure the cost of capital:

The yield on government bonds is typically used in the risk-free figure, which is 4% in this scenario. The economic value will also be measured as the average annual return on the S&P 500 index. It represents the average gain on the top 500 corporations and indicates the yield on investment products. Beta is an indicator of statistical risk, showing the uncertainty of the inventory evaluated about the economy. Four various methods have been used to measure beta, but, in all situations, equity returns are unpredictable relative to the variability of Apple’s stock returns (Zhang, 2019). It appears that beta is equivalent to 0.08, which implies that Apple’s stock was less risky than the economy and thus a less volatile venture. As a consequence of the estimates, the cost of capital proved to be 3.67 percent. This cost is smaller than the rate of growth of the dividends, and thus the equation produces a negative value at the end. Therefore, a two-stage reduced dividends model was determined.

That strategy ensures that the Company’s dividend will rise at a steady rate of 15.05% for the next six years. Following that, dividends would through at an exponential rate, which is a theoretical interest. It was agreed to use a moderate rate of Economic growth of 2.1 percent. It is a very optimistic prediction, which means that Apple can expand at the same rate as the economy is growing. Dividend payments in the next six years, and payments in future years have been reduced to the current value. The sum of these statistics is the price of stock-$105.178.

Table 1. evaluation of the intrinsic value

Investment recommendation

The second table includes a systematic review that will contribute to doing the final analysis. This is evident that Apple has one of the highest market capitalizations, given the mediocre success of its rivals. This also has the fastest earnings growth level.  The Company also has some of the best profitability ratios and reasonable growth estimates. The firm also has the smallest beta concerning other companies in the sector. Nevertheless, it is necessary to consider the aspect that the S&P 500 benchmark was used for the measurement of beta (Laestadius, 2019). As a result, the expected investment return was meager and unpredictable as the corporations included in the S&P 500 index work in different industries. If technology companies were to be used for contrast, the gain on the investment could be more reliable and potentially not volatile. In this scenario, the beta of Apple would be more durable, and the prediction would be much more practical. However, given excellent financial performance, the optimistic outlook of the organization, and the high economic value of the stock, it is suggested to engage in Apple’s shares.

Table 2. comparison of the competitors

Conclusion

This has been noted that the organization has sustained good sales and the development of new industries, as well as the added value of the brand with far more apps and third-party applications available to consumers. While the organization has had a lot of technological challenges, it has enjoyed strong sales with the aid of industry partners and great ads. The business invests a lot of cash on all forms of marketing content, but the organization should put more focus on online advertisements to minimize costs. The Company is well recognized for its creative ideas and thus encourages others to create innovative designs together with their contribution to society through CSR strategies. The very last portion of the study describes the guidelines that executives should use for successful iPhone advertising.

Works cited

Laestadius, L. I., Wahl, M. M., Pokhrel, P., & Cho, Y. I. (2019). From Apple to Werewolf: A content analysis of marketing for e-liquids on Instagram. Addictive behaviors, 91, 119-127.

Lordan, J., Gomez, M., Francescatto, P., & Robinson, T. L. (2019). Long-term effects of tree density and tree shape on apple orchard performance, a 20 year study–part 2, economic analysis. Scientia horticulturae, 244, 435-444.

Paam, P., Berretta, R., Heydar, M., & García-Flores, R. (2019). The impact of inventory management on economic and environmental sustainability in the apple industry. Computers and Electronics in Agriculture, 163, 104848.

Zhang, Z. (2019, December). Investment Decision Based on Value Factor and Financial Criteria—Taking Apple Inc. as Analysis Sample. In 2019 International Conference on Economic Management and Cultural Industry (ICEMCI 2019) (pp. 872-880). Atlantis Press.