In a report published Thursday, Goldman Sachs provides an update on its Apple Inc. AAPL “scenario analysis and tactical map for 2015.” According to the firm, the risk-reward profile is more balanced, but upside persists.
In this article, we will dig into the analysts’ bull and bear case scenarios, updated after Apple’s surprising December quarter performance.
“Bull case: $250.0bn CY15 revenue, $10.13 CY15 EPS, $172 implied valuation”
Within Goldman Sachs’ bull case scenario, the analysts take a considerably more optimistic view than their base case -- as it can be noticed from the figures above. The key drivers in this scenario are:
- iPhone: 232.9 million units in calendar 2015, assuming several tailwinds.
- iPhone: 46.7 percent gross margin in calendar 2015 (up from base case assumption of 46.1 percent). “This is primarily driven by the increased mix of the higher-margin iPhone 6 Plus as well as continued cost declines as volume ramps. This more than offsets the FX pressures that weigh on our base and bear case scenarios.”
- iPad/Mac: robust unit growth in 2015, to 64.9 million/21.7 million units.
- Apple Watch: 20.8 million units in 2015; the bull case “includes a very optimistic view of Apple Watch traction.”
- Buybacks: $48 billion in 2015
“Bear case: $216.8bn CY15 revenue, $7.92 CY15 EPS, $95 implied valuation”
The bear case scenario takes a “more muted view of iPhone units and GM as well as our [the analysts’] outlook for iPad, Mac, Apple Watch. We also temper our assumptions for Apple’s share repurchase program within our bear case.” The key drivers in this scenario are:
- iPhone: 203.6 million units in calendar 2015.
- iPhone: 44.4 percent gross margin in 2015, “driven primarily by several factors including: (1) Greater-than-expected FX pressure; (2) the lack of a significant GM ramp across the cycle; (3) a lower mix of iPhone 6 Plus.”
- iPad/Mac: 60.4 million/20.3 million units in 2015, assuming that “the iPad business continues to decline on a unit basis in CY2015 and that Mac units only increase by a modest 4% y/y.” The firm also factors in FX-driven headwinds to gross margins within both segments in its bear case.
- Apple Watch: 11.6 million units in 2015.
- Buybacks: $34 billion in 2015.
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