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Technology Stocks : Apple Inc.

AAPL 278.03

-0.3%

Dec 11 4:00 PM EST

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To: Linda Kaplan who wrote (9437)	3/14/1998 5:56:00 AM
From: Moominoid	Read Replies (1) of 213176

>I don't know how high AAPL can go by >then Here's some projections using the CAPM for AAPL: beta=0.45 so the CAPM discount rate is 8.425%. That would be the long-run equilibrium rate of return on AAPL according to the theory. Given forecasts (First Call consensus) of $1.10 EPS for 98 and $1.31 EPS for 99 the current share price of $27.25 means that in equilibrium profits should grow at 3.6% in 2000 and in every year after that forever (or some other time path that has the same net present value). If inflation was 2.5% then 3.6% is only 1.1% real profit growth which is below the long-run rate of growth of GDP. If 3.6% is right then AAPL will have a strongly falling market share in the long term. If instead we plug in some alternative profit growth rates we get what Apple's current true value is: 4% $29.50 5% $37.75 6% $52.94 Even 6% could be conservative. After the price rises to that level then if there would be no more profit surprises (or changes in interest rates etc.) the price would keep rising at 8.45% forever. Well it's just a theory, but they did win the Nobel Prize for it. David

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