Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Apple Inc. (AAPL).
Profile
Apple is one of the world’s largest technology companies, known for its integrated hardware–software ecosystem spanning the iPhone, Mac, iPad, Apple Watch, and rapidly expanding Services segment. With more than 2 billion active devices globally, Apple’s recurring revenue engine—App Store, iCloud, Apple Music, AppleCare, and advertising—continues to grow as a percentage of total sales, driving higher margins and stability. Apple’s global brand strength, supply-chain mastery, and tightly controlled ecosystem reinforce one of the most durable competitive moats in the world.
DCF Analysis
Inputs:
Discount Rate: 10%
Terminal Growth Rate: 3%
WACC: 10%
Forecasted Free Cash Flows (in billions USD)
2025: $100.0 → PV: $90.9
2026: $105.0 → PV: $90.3
2027: $110.0 → PV: $89.9
2028: $115.0 → PV: $89.4
2029: $120.0 → PV: $89.0
Total Present Value of FCFs = $449.5B
Terminal Value Calculation
Using perpetuity growth model with 2029 FCF = $120B:
TV = (120 × 1.03) ÷ (0.10 − 0.03) = $1,766B
Present Value of Terminal Value = $1,227B
Enterprise Value
Enterprise Value = 449.5B + 1,227B = $1,676.5B
Net Debt
Cash & Equivalents: $54.697B
Total Debt: $98.657B
Net Debt = $43.96B
Equity Value & Per-Share Value
Equity Value = 1,676.5B – 43.96B = $1,632.5B
Shares Outstanding: ~14.77B
Intrinsic Value per Share ≈ $110
Conclusion
DCF Value: $110
Current Price: ~$284
Margin of Safety: –61%
Apple remains a global technology powerhouse with unmatched ecosystem lock-in, world-class profitability, and a massive recurring revenue base. Yet under conservative DCF assumptions, AAPL trades materially above intrinsic value—suggesting the market continues to price Apple as a steady compounding franchise with sustained buybacks, high-margin Services growth, and industry-leading cash generation.
For long-term investors, Apple represents exceptional quality, durability, and capital-return consistency. But at current prices, the stock offers limited margin of safety even as the business remains one of the strongest and most reliable generators of free cash flow in the world.
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