If you are using one of my valuation books for reference, try the supporting websites. If you are interested in the theory or practice of valuation, you should have Damodaran on Valuation on your bookshelf. 2 The Apple “Market” Balance Sheet Assets Market Value (in billions) Liabilities Market Value (in billions) Operating Businesses (Smartphones, Computers and Services) $544 Debt $ 94 Cash $245 Equity $695 Total $789 Total $789 Apple’s cash balance is the largest ever held by a company. Professor, Thanks for your post. In business, there are the storytellers who spin compelling narratives and the number-crunchers who construct meaningful models and accounts. So, in my story, I saw Apple continuing to produce cash flows, with low revenue growth and gradually decreasing margins, as the smartphone business became more competitive. The "mood swings" you identify are almost humorous in a supposedly rational market.Have you ever turned your attention to Tesla? Professor,Firstly, I would like to say thank you x 100 for all the work you do. A Do-it-yourself (DIY) Valuation of Tesla: Of Investment Regrets and Disagreements! ~200 soldiers stole a mine that is still producing silver.A less moral one (when we forget where Apple gets Colgan from), but Apple is not the cash machine the conquering of the Inca's was. January 2017 Data Update 9: Dividends and Buybacks. Those expectations, though, don't factor in the reality that as a much larger player with huge profit margins, Apple is more likely to be disrupted than be disruptor. The only questions are how much and in which direction. Regular Classes. Blog Headlines (by Date) Blog Index : A Viral Market Update IX: A Do-it-Yourself S&P 500 Valuation - Aswath Damodaran . I describe myself as a teacher first, who also happens to love untangling the puzzles of corporate finance and valuation, and writing about my experiences. Aswath Damodaran is a professor of corporate finance and equi… The Storming of the Bastille: The Reddit Crowd targets the Hedge Funds! Available on iPhone,iPad,Android and Web. Why not use the Sales-to-Capital Ratio to project the Reinvestment needs for the Terminal Period as well?Indeed, if I use the 'Revenue Growth/ROIC*EBIT(1-t)' formula, the Reinvestment need in the Terminal Period eats up a lot of value and looks out of line with prior Reinvestment needs. Top Books Top Audiobooks Oprah’s Book Club Investment Philosophie‪s‬ Successful Strategies and the Investors Who Made Them Work. Apple began 2012 by attaining the largest market cap in the world, with some analysts predicting that it … Cancel. I did not make this decision abruptly or idly and I did consider two options: (a) put a stop loss and (b) put put options. Last week, was my data week, wh... What is a hurdle rate for a business? ‎In this episode, I talk to Dr. Aswath Damodaran of NYU Stern about valuation. That was the same reaction that I had as I watched another earnings report from Apple and the usual mix of reactions to it, some ho hum that the company made. "I mean, I sold short on Apple … However when one notes that Ford has a capitalization to sales ratio of about 1/3 while even going out to year end 2018 Tesla is at 3/1 the question becomes is this anywhere near GARP? I teach corporate finance, valuation and investment philosophies at the Stern School of Business at New York University. A Do-it-yourself (DIY) Valuation of Tesla: Of Investment Regrets and Disagreements! For Apple, the story that I have been telling about the company for the last five years has been remarkably unchanged. Teaching Resources. Gross Income Based: Net Income Based : Industry Name: Number of firms: Gross Margin: Net Margin: Pre-tax, Pre-stock compensation Operating Margin The GoPro and LinkedIn Question! As we approach the turn of the calendar year, I have my own set of rituals that prepare me for the new year. Would a discontinuing of guidance by Apple help in stabilising its share price by reducing volatility or would this be overshadowed by the uncertainty it would create around important variables such as expected revenue or units sold?Best,Michael J. I would hasten to add that I have never owned Google, as an investor, and that may reflect the fact that I continually under estimate the profit-making power of its online advertising engine. My not-so-profound thoughts about valuation, corporate finance and the news of the day! First, each of them derives their value from, Each company, though, has areas where it has advantages. I asked since if you set the Feb. 2017 model the same setting as May 2016, and override with the same 8% cost of capital, then the resulting value per share drops $9.00 to $120.71.I thought these model settings should be consistent, unless something significant had changed about the company or industry. If I use Sales-to-Capital to project that figure in line, that looks more logical in my eyes. My Gedankenexperiment inputs: It is certainly no nokia or blackberry; it's that model to start but with, embedded services (of nearly unlimited variety provided by a high % of external labor) on an owned platform - both hardware and software, with previously unheard of optionality (cash). One need only look at Nokia as evidence that superior margins of a market leader can not, and will not last forever. I am a teacher first, who also happens to love untangling the puzzles of corporate finance and valuation, and writing about my experiences. Apple and Alphabet, the two companies jockeying for the  prize of “largest market cap company in the world” are both incredibly successful businesses, with unparalleled cash machines (the iPhone and Google Search) at their core. Tuesday, January 12, 2021 . Aswath Damodaran, professor of finance at NYU, joins "Squawk Alley" to discuss Apple and Tesla's stock split. In fact. Bringing Professor Damodaran Teaching, Writing, Data and Spreadsheet resources at your fingertips. AN ANALYSIS OF APPLE Aswath Damodaran. Books: You can access the preface and webpage of all the editions of Damodaran books. Yet, since we are using annual revenue figures (even if one of them is trailing), why is annualisation necessary here?Thank you in advance! Sounding good or Doing good? That said, it is worth emphasizing how much Apple is on the iPhone roller coaster ride, reporting better earnings in the quarters immediately after a new iPhone is released and much worse earnings in the quarters thereafter. Subscribe today to get a free E-Book from us as well, Our Stock … Each view shows the latest 20 blog posts, to read older, press the "Load more" button on the bottom. Momentum will change, almost always without any advance warning and for no good fundamental reason, and when it does, I hope that you are able to get ahead of it. Ebenso wäre es ein Leichtes, Aktien zu finden, die in einzelnen Jahren oder über lange Zeiträume hinweg hohe Dividendenrenditen aufwiesen bei gleichzeitig besonders schlechten Gesamtrenditen. "I think of the four big players: Apple, Alphabet, Facebook and Amazon, Apple is … Blog: You can read all the posts from Damodaran blog within the app. At $682.40, the price at which the class C shares were trading at on February 12, 2016, the stock is trading at about 8% above the median price, with a 35% chance of being under valued. Blog: You can read all the posts from Damodaran blog within the app. ‎"Aswath Damodaran is simply the best valuation teacher around. You can bet that I do." Each view shows the latest 20 blog posts, to read older, press the "Load more" button on the bottom. Data Update 2 for 2021: The Price of Risk! Data Update 3 for 2021: Currencies, Commodities, Collectibles and Cryptos. 2 The Apple “Market” Balance Sheet Assets Market Value (in billions) Liabilities Market Value (in billions) Operating Businesses (Smartphones, Computers and Services) $544 Debt $ 94 Cash $245 Equity $695 Total $789 Total $789 Apple’s cash balance is the largest ever held by a company. 6 Misconceptions about Valuation ¨ Myth 1: A valuation is an objective search for “true”value ¤ Truth 1.1: All valuations are biased. Aswath Damodaran, professor of finance at NYU, joins "Squawk Alley" to discuss Apple and Tesla's stock split. Analysts projected that Nokia would maintain market dominance for many years to come...until both Apple changed the model and low cost producers made feature phones of similar quality as Nokia. Having never valued Alphabet on this blog, though I have valued it in my classes multiple times, its earnings report is a good time to initiate the process with a valuation. But that doesn't mean it would not be a good investment. As you identified it is primary an advertising company. Today Mike speaks with Professor Aswath Damodaran about his book, Narrative and Numbers: The Value of Stories in Business. You can see the cash build up between 2007 and 2016 in the chart below: Note that while Apple was returning $183 billion in cash between 2013-2016, its cash balance continued to increase, as its cash inflows increased even more. If it is a mistake, how would that affect the AAPL valuation?Thanks! He teaches the corporate finance and valuation courses in the MBA program as well as occasional short-term classes around the world on both topics. Dear Prof. Damodaran.Thank you very much for your hardwork and commitment in bringing out this valuation experience and knowledge of yours to the world. Just as my valuation looked too optimistic a year, when the earnings report contained darker news, it may seem too pessimistic this year, after a much sunnier report. Anant Sundaram is a professor of Finance at the Tuck School of Business at Dartmouth. We have no information except their SEC form: https://www.sec.gov/Archives/edgar/data/1564408/000119312517034993/d270216ds1a.htmSo can you please work through a valuation of this....(hopefully before the IPO)On a specific note, I looked at their income statement 2015 and 2016. Using the process that I describe, perhaps in too much detail. (June 2016), Apple: FCFE, Dividends and Cash Build up - 1988-2016. Search apple.com. Sounding good or Doing good? Descarga la app Aswath Damodaran y disfrútala en tu iPhone, iPad o iPod touch. Starting in 2013, when Apple started to tap into its debt capacity, the company has been able to add to its potential dividends each year. From semester long to online courses, from executive classes to seminars. Some of you may find my story too cramped , seeing a greater possibility than I do of Apple breaking through into a new, big market (with Apple Pay or the Apple iCar). A blog about markets, finance and all things money related. The Price-Value Feedback Loop: A Look at GME and AMC! If you are interested in the theory or practice of valuation, you should have Damodaran on Valuation on your bookshelf. I know that one reason for Google's restructuring/renaming exercise last year was an ostensible desire to improve transparency, but I think that there may be less here than promised, at least at the moment. Cancel. Thursday, June 4, 2020 . Lade Aswath Damodaran und genieße die App auf deinem iPhone, iPad und iPod touch. Thanks for the clarification.Best regards, Rob, Professor Damodaran,Thank you for the opportunity to comment on your excellent work. Analyze average rating, monitor reviews, reply to reviews, and gain product insights from user feedback in one workspace. Stories are driving the prices of those high flying stocks—narratives about what’s happening and why are at the core of all this mess. Or are there enough restrictions legally? Ally Mahmoud(D’20), a Computer Science major from Dartmouth College, provided outstanding software development services. Data Update 4 for 2021: The Hurdle Rate Question! To learn more about valuation, you can visit Professor Aswath Damodaran Blog here. Thank you for the interest AAPL analysis. Additiona… Top Books Top Audiobooks Oprah’s Book Club Investment Valuation Tools and Techniques for Determining the Value of Any Asset. Tesla has a long way to go before it justifies its current stock price, New York University finance professor Aswath Damodaran told CNBC on Thursday.. Damodaran, known as … Does the exchange rate makeup for the interest rate arbitrage opportunity. Or is the ability to ignore issuing earnings guidance a luxury reserved for the mega-caps or for companies in which investors place a large amount of confidence? In the picture below, I have my February 2017 valuation of Apple. So, feel free to download my valuation, change the inputs you don't like and make it your own. I spent the first week of 2021 in the same way that I have spent the first week of every year since 1995, collecting data on publicly traded... As we approach the turn of the calendar year, I have my own set of rituals that prepare me for the new year. uValue app . The first is that in spite of the immense amounts of cash that Apple has returned each year, its cash balance has increased each year, partly because its operating cash flows are so high and partly because they are being supplemented by debt payments. Can aapl buy back so much stock that I'm the last shareholder standing in 20 years? Having valued Apple multiple times on this blog over the last five years, and bought and sold the stock based on those valuations, the most recent earnings report is an opportune time for me to revisit Apple’s value. Musings on Markets My not-so-profound thoughts about valuation, corporate finance and the news of the day! In my July 2012 valuation, where I looked at Apple just after it had become the largest market cap company in the world and had come off perhaps the greatest decade of disruption of any company in history (iTunes, iPod, iPhone and iPad), I concluded that while Apple was one of the great cash machines of all time, its days of disruption were behind it, partly because Steve Jobs was no longer at the helm but mostly because of its size; it is so much more difficult for a $600 billion company to create a significant enough disruption to change the trend lines on earnings, cash flows and value. I know some part of it maybe proprietary but if you could just share your general approach to your simulations it would be helpful enough. Finding your place in the Value/Price Game! Blog; TFP profile; Contact; Search for: Aswath Damodaran. My name is Aswath Damodaran and I teach corporate finance and valuation at the Stern School of Business at New York University. There were a few things that became transparent in Google's last earnings release, as captured in this picture of a key part of the earnings release from the company: If this were a boxing match, Apple and Alphabet would be the super heavyweights, fighting it out for the world championship. Others may find this story too optimistic, perhaps seeing a more precipitous fall of profit margins in the smart phone business and a greater tax liability from trapped cash. Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year (2020)! 2.0 • 2 Ratings; $74.99; $74.99; Publisher Description. Author: Tan KW | Publish date: Fri, 5 Jun 2020, 10:30 AM . Apple; Mac; iPad; iPhone; Watch; TV; Music; Support; Shopping Bag + Cancel Apple Books Preview. Is this a mistake or is there some reason behind it that I missed? Don't you need to either a) deduct interest payments from free cash flows; or adjust WACC for unlevered capital structure?Thanks!Kiyoshi, Great post,My questions is on the divergent policies of Apple and Alphabet on issuing guidance.Something that I often think about is the effect of earnings guidance on investor expectations and consequently on share prices.I understand the inherent logic in issuing guidance; improving communication with markets, transparency concerns and potentially lower share price volatility though I cannot help but wonder if such a practice can instead act to a company's detriment. Professor : I´ve been a reader of yours for many years ! Narrative Resets: Revisiting a Tech Trio (August 2015) Race to the top: The Duel between Apple and Alphabet (February 2016) Icahn exits, Buffett enters: Whither Apple? Wednesday, June 3, 2015 . Of course a market can be replaced by another - nothing is certain. -- Michael J. Mauboussin, Chief Investment Strategist, Legg Mason Capital Management an… Monday, January 27, 2020 . Author: Tan KW | Publish date: Tue, 28 Jan 2020, 1:02 PM . By Aswath Damodaran, Kerschner Family Chair in Finance Education If you have been an Apple stockholder last year, you probably feel like you have been on a roller coaster. Author: Tan KW | Publish date: Thu, 4 Jun 2015, 10:35 AM . My not-so-profound thoughts about valuation, corporate finance and the news of the day! If done well there will always be a premium available for the aggregation and simplicity. ‎Preview and download books by Aswath Damodaran, including Investment Valuation, Investment Valuation and many more. Each view shows the latest 20 blog posts, to read older, press the "Load more" button on the bottom. Your perspective would be especially welcome. As as sports fan, watching Brady and Belichick win the Super Bowl, Roger Federer triumph at the Australian Open and LeBron James carry the Cleveland Cavaliers to victory over the Warriors, it struck me how we take uncommon brilliance for granted. Kiyoshi: I am not subtracting out cap ex, but reinvestment = cap ex - depreciation + chg in WC3. 3 Apple’s Cash Spigot. 2.0 • 1 Rating; $45.99; $45.99; Publisher … Thanks!! The plunder of the Inca's was a better cash machine. Products Ratings & Reviews hot. Anant and Aswath teach valuation and corporate finance classes to MBAs and executives. I feel like I can never be sure exactly what a company is worth but I like guessing and trying to make money. It contained a modicum of good news, insofar as there was growth in revenues as opposed to the decline posted in the prior quarter and still-solid profit margins, but the revenue growth was only 3% and the margins are still lower than they used to be. Cancel. Aswath Damodaran says Apple shares are trading at an attractive valuation on CNBC's "Squawk Alley" Monday. Data Update 1 for 2021: A (Data) Look Back at a Most Forgettable Year (2020)! The Price-Value Feedback Loop: A Look at GME and AMC! I am very curious on the dynamics of when to sell a stock and often see people holding on longer than they said they would. Aswath Damodaran reviews, ASO score & analysis on App Store, iOS. To learn more about how you can start managing your own wealth , subscribe to our monthly Asia-In-Focus Report. Course Description Every investor needs a set of core beliefs that guides the way he thinks about investments and provides a roadmap for creating investment strategies. Aswath Damodaran reviews, ASO score & analysis on App Store, iOS. Professor, do you feel that once *any* company reaches Apple's size, high growth will be next to impossible to come by?It does seem like there is some natural asymptote that large companies will reach in terms of market cap. Apple stock represents a value play and is worth much more than $450 per share, New York University finance professor and valuation expert Aswath Damodaran says. In a recent interview with CNBC, NYU Stern School of Business professor Aswath Damodaran discussed the new highs made in stocks like Apple (NASDAQ:AAPL) and … Apple Inc. (NASDAQ:AAPL) Aswath Damodaran – Stare into the Abyss: Facing up to uncertainty with simulations. My name is Aswath Damodaran, and I teach corporate finance and valuation at the Stern School of Business at New York University. I was wondering why the amount of reinvestment jumps around 4x in the terminal year on your spreadsheet (to 6,235 million)? I did not understand the logic behind this. In conventional financial analysis, you make point estimates for variables to arrive at an expected value. Available on iPhone,iPad,Android and Web. ‎"Aswath Damodaran is simply the best valuation teacher around. Wall Street does not seem to place much value on this fact. Top Books Top Audiobooks Oprah’s Book Club Investment Philosophie‪s‬ Successful Strategies and the Investors Who Made Them Work. Marking Time: A new year, a fresh semester and its class time! Local Nav Open Menu Local Nav Close Menu. Last week, was my data week, wh... What is a hurdle rate for a business? Your outstanding Options' value seems much lower than the company's estimate (are we talking about the same items as the company is calling them Restricted Stock Units). As long as the momentum game continues, you will make money far more easily and quickly with Alphabet than with Apple, but just a note of warning, from Apple's own recent past. very good post, one of your most readable and concise! It looks just like it did last year, a great cash machine, with very slow-growing revenues and declining margins. Apple: FCFE, Dividends and Cash Build up - 1988-2016; Apple: Valuation in February 2017; Posted by Aswath Damodaran at 11:57 AM. Apple; Mac; iPad; iPhone; Watch; TV; Music; Support; Shopping Bag + Cancel Apple Books Preview. I left my original narrative largely intact, with revenue growth remaining at 12% and pushed up the target pre-tax operating margin to 32%, and arrived at a. The Dean of Valuation: Aswath Damodaran. Both Apple and Alphabet are good businesses, but. Analyze average rating, monitor reviews, reply to reviews, and gain product insights from user feedback in one workspace. ¤ Truth 1.2: The direction and magnitude of the bias in your valuation is directly proportional to who pays you and how much you are paid. Data Update 4 for 2021: The Hurdle Rate Question! Thank you for this post. Apple; Mac; iPad; iPhone; Watch; TV; Music; Support; Shopping Bag + Cancel Apple Books Preview. As in the Jobs era Apple it seems less of a company than a cult. Apple shares, which have slumped nearly 20 percent in the month of November, are a good buy at current levels, says professor Aswath Damodaran. I have a question regarding the simulations you run and refer to in your valuations. Blog: You can read all the posts from Damodaran blog within the app. If you are in that group, please take my structure and make it yours, with a higher growth rate coming from your disruptive story, accompanied by lower margins and higher reinvestment. Blog Index : Data Update 2 for 2020: Retrospective on a Disruptive Decade - Aswath Damodaran . Marking Time: A new year, a fresh semester and its class time! This is the essence of an investment philosophy. With time, the number of spreadsheets on this page has also increased. I teach corporate finance, valuation and investment philosophies at the Stern School of Business at New York University. Aswath Damodaran: If your most recent year's operating income is unusually low or high, you can use the average operating income from the last few years. As a counter to the market's excitement, I decided to compare the narrative (and value) that I had for Alphabet in November 2015 (after their last earnings report) to the narrative (and value) after this one (in February 2016). Blog Headlines (by Date) Blog Index : Cash, Debt and PE Ratios: Cash is an upper and debt is a downer! In the Feb. 2017 sheet you have this setting to No, while in the May 2016 sheet you have this setting at Yes, with the cost of capital after year 10 set to 8%. Bringing Professor Damodaran Teaching, Writing, Data and Spreadsheet resources at your fingertips. Data Update 3 for 2021: Currencies, Commodities, Collectibles and Cryptos. Aswath Damodaran. Some folks have thought about this a lot longer and harder than I and come to the conclusion that the only thing that it materially improves is trading volumes.Is earnings guidance' as a concept to improve shareholder returns redundant? I intend to have online versions of all three courses here, as well as other finance-related videos. Author: Tan KW | Publish date: Wed, 13 Jan 2021, 8:01 AM . Dear Professor,I recently found this web site and am enjyoing your posts a lot!There are somehtings I find difficult to understand in your valuation calculation. How can they run the company with Cost of Sales > Revenue. Another of your very rational and objective valuations of Apple. The Sharing Economy come home: The IPO of Airbnb! (Later this year), The Perfect Investor Base? Rob,Restricted stock units are not options and are actually much easier to deal with. Rich Fagan. Blog: You can read all the posts from Damodaran blog within the app. You too can alter the inputs to your liking and make your own judgment on Apple! Today Mike speaks with Professor Aswath Damodaran about his book, Narrative and Numbers: The Value of Stories in Business. I have a query regarding your Apple value of Options. Hierzu gehören Apple, Microsoft, Amazon, Alphabet (Google), Facebook und Warren Buffets legendäres Unternehmen Berkshire Hathaway (seit über 50 Jahren ohne Dividende). The definitive … Another enjoyable and highly useful valuation analysis where both the conclusions and methodology are of high interest. Aswath Damodaran is a professor of Finance at the Stern School of Business, New York University. Also do investors who are entering the stock recently like Warren Buffet worry you that perhaps you are incorrect on the valuation? I won't make you read all of the posts that I have on Apple, but l, Last week, Apple released its latest 10Q and in conjunction with its latest 10K (Apple's fiscal year end is in September). As you point out, Apple is a tremendous company, but you must value you it with a rational perspective as to its value growth duration. Aswath Damodaran, NYU Stern School of Business, says the company is overvalued. Lazarus Rising or Icarus Falling? He received his MBA and Ph.D degrees from the University of California at Los Angeles. What's Lyft really worth?