Keep in that twitter post is based on performance not on valuation. Anything AI relate is above valuation level based on traditional metric.
For example AAPL at $269 and DCF at $206.
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Chain of Thought for DCF Valuation of Apple Inc. (AAPL) To determine the Discounted Cash Flow (DCF) intrinsic value per share for Apple Inc. (AAPL), we apply a two-stage DCF model. This projects free cash flows (FCF) over a 5-year high-growth period, computes a terminal value assuming perpetual growth thereafter, discounts all to present value using the weighted average cost of capital (WACC), and divides by diluted shares outstanding to arrive at the per-share equity value. Apple holds massive net cash (~$60B as of Q4 FY2025), with negligible debt, so enterprise value approximates equity value.
Step 1: Gather Key Inputs Using data as of November 2, 2025 (post-Q4 FY2025 earnings on October 31):
- Trailing Twelve Months (TTM) FCF: $110.5 billion USD. Aggregated from Q4 FY2025 FCF of $28.2B, reflecting services growth (22% YoY) offsetting hardware softness.
- High-Growth Rate (Years 1-5): 10% annually. Consensus from analysts (e.g., Finbox: 9.8% unlevered FCF CAGR through 2030), driven by iPhone/services ecosystem, AI features in iOS 19, but capped by China exposure and mature market saturation.
- Terminal Growth Rate: 3%. Standard for a cash-rich tech behemoth, aligning with inflation/GDP.
- Discount Rate (WACC): 8%. Averaged from estimates (GuruFocus: 8.1%, ValueInvesting.io: 8.3%), with beta ~1.2, risk-free rate ~4%, and ERP ~5%.
- Shares Outstanding: 15.22 billion (diluted, Q4 FY2025, after buybacks).
All in USD; verified via financial API for recency.
Step 2: Project Future Free Cash Flows Base FCF0 = $110.5B. Grow at 10% for 5 years:
- Year 1: $110.5B × 1.10 = $121.55B
- Year 2: $121.55B × 1.10 = $133.71B
- Year 3: $133.71B × 1.10 = $147.08B
- Year 4: $147.08B × 1.10 = $161.79B
- Year 5: $161.79B × 1.10 = $177.97B
Step 3: Calculate Terminal Value End of Year 5: FCF6 = $177.97B × 1.03 = $183.31B. TV = $183.31B / (0.08 - 0.03) = $183.31B / 0.05 = $3,666.12B.
Step 4: Discount to Present Value Discount at WACC = 8%:
- PV(Year 1 FCF) = $121.55B / 1.08¹ ˜ $112.55B
- PV(Year 2 FCF) = $133.71B / 1.08² ˜ $114.65B
- PV(Year 3 FCF) = $147.08B / 1.08³ ˜ $116.89B
- PV(Year 4 FCF) = $161.79B / 1.084 ˜ $119.24B
- PV(Year 5 FCF) = $177.97B / 1.085 ˜ $121.68B
- Sum of PV(FCFs) = $584.99B
- PV(TV) = $3,666.12B / 1.085 ˜ $2,496.07B
Enterprise Value (EV) = $584.99B + $2,496.07B = $3,081.06B.
Step 5: Derive Per-Share Value Intrinsic Value per Share = EV / Shares = $3,081.06B / 15.22B = $202.44.
Step 6: Interpretation and Sensitivity - Current stock price (Nov 1 close): $226.80. Implies ~11% overvaluation, post-earnings: Q4 revenue $94.9B (+6% YoY), EPS $1.64 beat, but iPhone sales flat; AI/Vision Pro hype supports premium. Comparable DCFs: AlphaSpread ~$195 (overvalued), Simply Wall St ~$220 (fair).
- Sensitivity: If growth = 12%, value ~$235; if 8%, ~$175. If WACC = 7.5%, value ~$215; if 8.5%, ~$190. FCF bolstered by $110B+ annual buybacks, but watch China tariffs/AI capex (~$10B FY2026).
This model is directional; adjust for scenarios in a spreadsheet. DCF affirms Apple's fortress balance sheet and ecosystem moat. |
