Trefis's graphical modelling tools require Flash, but here's a preview of some of the content you'll see once Flash is enabled:

Investment Overview for Apple (NASDAQ:AAPL)

${header:whathaschanged}

iPhone business returns to growth over Q1

Apple's current iPhones appear to be doing better than their predecessors, driven by lower pricing on the iPhone 11 and more advanced features on the iPhone 11 Pro. iPhone revenues for Q1 2020 grew by about 8% year-over-year to $56 billion. It's possible that this momentum could continue over 2020, as Apple is likely to introduce its first 5G handsets later this year.

${header:potential}

Below are key drivers of Apple's value that present opportunities for upside or downside to the current Trefis price estimate for Apple:

iPhone revenues And margins post improvements

• iPhone Revenue and Gross Margin:
  We estimate that Apple's iPhone revenues will improve from $ 142 billion in FY'19 to around $170 billion by FY'26. However, if the company is able to improve its revenues to levels of around $190 billion by the end of our review period, with gross margins rising to about 40% from our current forecast of 38%, there could be an upside of about 15% to our price estimate.

For additional details, select a driver above or select a division from the interactive Trefis split for Apple at the top of the page.

${header:summary}

Apple makes money primarily by selling mobile phones, computers, and tablets to consumers worldwide.  Apple's well-known consumer products include the iPhone, Mac, iPad and Apple Watch.  In addition to selling hardware, Apple makes money from services that include the App Store, Apple Music and iCloud. Our valuation model is based on Apple's fiscal year, which ends on September 30.

${header:sourcesofvalue}

We believe the iPhone segment is more valuable than the Mac and iPad segments due to:

Large mobile phone market

The smartphone market is significantly larger than the tablet market and margins in the smartphone business are also likely to be higher. Globally, about 1.9 billion smartphones were shipped in 2018, compared to tablet market which is estimated to be less than a tenth of this size.

${header:trends}

Increasing Competition and Saturation in High-end of Smartphone market

In June 2007, when Apple entered the then-nascent smartphone market with the iPhone, Nokia and RIM were the only players in this segment. iPhone's success led to the entry of other players in the market, which has seen a huge spurt in demand in recent years. Today, consumers have a huge array of smartphones to choose from, including premium Android smartphones from Samsung and Google and low-cost manufacturers such as Lenovo and Xiaomi. While the smartphone market could expand slightly, much of the sales are likely to come from low and mid-priced handsets in emerging markets, while the high-end of the market - which Apple caters to - is becoming increasingly saturated. Apple posted a year-over-year decline in iPhone sales during FY'16 and FY'19 as well.

Services Present A Growth Opportunity

Apple's Services business has grown at a rate of over 20% between FY'15 and FY'19, eclipsing the iPad and Mac to become the company’s second-largest business segment with revenues of about $46 billion in FY'19. While the App store remains the primary driver of growth, services such as Apple Music are also gaining traction. Apple's base of paid subscriptions on its platform has also been rising steadily, with about 450 million active subscriptions at the end of FY'19.

iPad Shipments Gaining Traction on New Launches

Global tablet shipments have been sluggish on account of longer upgrade cycles for tablets and cannibalization from large-screen smartphones. Apple has been impacted, with iPad shipments declining by about 4% in FY'17 and remaining almost flat in FY'18. However, things started to turnaround in FY'19, driven by Apple's two-pronged strategy of focusing on both value-priced tablets for casual users while catering to professionals with its higher-powered iPad Pro devices, which are priced as high as $1800.

Mac Outperforms PC Industry

While the global PC market has been shrinking, Apple has largely been able to buck the trend given its superior product differentiation, proprietary Mac OS software and applications, sleek design and premium build quality. Apple also benefits from the fact that it plays in the high end of the PC market – typically focusing on the lucrative $1,000+ price points – rather than the commoditized low and mid-range where a bulk of the volumes come from. For instance, shipments of Mac computers grew by about 10% year-over-year in Q3 FY'17, compared to the global market which contracted by about 0.5% per IDC.

How Does Trefis Modelling Work?

How do we get the historical numbers for this chart?

Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.

Who came up with the Trefis forecast for future years?

The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.

How does my dragging the trendline on the chart impact the stock price?

1. We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
2. We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.

See more on: DCF Methodology

View All Help Topics