Apple Inc. and the Happiest Moment


  • Apple Inc., USA
  • Feb 12, 2015 
  • CMP: $125
  • Global #1 Cap – Mkt Cap $ 727 billion 

Dear Investor, Almost 2 years ago, I wrote an investment note on Apple Inc. Here it is.

There’s nothing wrong with Apple Inc.

The key message was that Apple is innovative, cash rich, will reward shareholders, and even after Steve Jobs, it will do well.

Today, we have just seen the Q4/2014 results from Apple, and its been a record quarter.

See Article.

The launches of iPhone 6 and 6 plus were very successful. Apple Pay and Apple Watch are the new products that have good potential. And every analyst who tracks Apple is now positive about the stock and rates it a BUY.

So lets see. In about 2 years, the share has appreciated from $63.7 (my call was at $446, and then there was a 7 for 1 stock split) to $124.9, a gain of 96%. And now every analyst calls it a Buy?

It is at such moments that an equity analyst feels the happiest. The day when after a very good appreciation in a recommended stock, it gets rediscovered and rated highly by the community.

Cheers to such moments.

The most profitable moment is still to come.


Punit Jain. Founder, JainMatrix Investments

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This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Any questions should be directed to the director of JainMatrix Investments at Punit Jain does not have any shareholding in Apple Inc., and JM and its promoters/ employees have no financial interest in Apple Inc., and no known material conflict of interest as on date of publication of this report. He does own an old iPad2.


There’s nothing wrong with Apple Inc.

  • Feb 21st 2013 
  • CMP: $446
  • Global #1 Cap – Mkt Cap $ 421 billion. 
  • Advice:  Buy

Note our more recent Feb 2015 note on Apple

Apple Inc and the Happiest Moment 

This week, a subscriber asked me a simple sounding question … What do you think of Apple at this point?

Let me try to answer this ….

About Apple

This iconic American firm is an innovation powerhouse. It has created new products with so much originality, usability and technology finesse that it has created new markets for itself.

jainmatrix investments, apple

  • The Macintosh showed that Apple had the streak of innovation decades ago (launch in 1984).
  • Tens of manufacturers struggled with Tablets for years, with no success. Apple launched iPad, and showed them how (launch 2010).  Ditto a bit earlier for iPods (launch 2001).
  • In mobiles, the success is even more amazing. In a crowded market, with many success stories, and tens of fierce competitors, Apple launched iPhone (in 2007), a single model, with 2-3 variants, a premium pricing, and a limited network alliance (in the USA). And the top end of the market exploded.
  • Its iTunes that binds these products together beautifully with the application ecosystem, music, video and payment systems.
  • Steve Jobs, the Chairman and Founder of Apple Inc is a legend for his leadership and focus, which has pretty much taken Apple on this pioneering path. We lost him in 2011, and Tim Cook took over as CEO of Apple.
  • In Sept 2012, Apple Inc shares were $700, and market cap at $656 billion, making it by far the most valuable company in the world.

Cut to today

  • The Apple innovation machine continues relentlessly. The new iPhone 5 is better and selling well. The iPad mini expands the market with premium features at a lower price point.
  • See Apple financials in Fig 1 with revenue in USD m (LHS) and Margins in %, EPS in USD and P/E on RHS
Apple Financials, JainMatrix Investments

Fig 1 – Apple Financials, JainMatrix Investments (click to expand)

  • Revenues, EBITDA and EPS have grown at 54%, 68% and 72% CAGR respectively over the last 4 years.
  • Markets like India are summarily dismissed as ‘not big enough’ to warrant corporate attention :-)
  • However, the Apple share price is $449, down 36% in 5 months, and market cap is $421 billion.
  • The cash and cash equivalents on hand at Apple is $137 billion (about $146 per share). Last year profits were $42 billion.
  • PE of Apple is at a 5 year low, of about 10 times, see Fig 2.
Apple PE, JainMatrix Investments

Fig 2: Apple PE, JainMatrix Investments (click to expand)

So, what’s gone wrong?

  • Apple it seemed did not know what to do with its massive profits. And profits, unless shared with shareholders, or used in good capital investments, earn very little in a bank account.
  • Things are now changing a bit …. Shareholders started receiving a quarterly dividend of $2.65 a share from July 1, 2012. Share buybacks  began in the fiscal year starting Sept. 30 2012 and happen over three years. So now, Apple plans to return $45 billion to its shareholders through dividends and stock repurchases over the next three years.

And what’s the outlook for Apple at this point?

  • Excited by consumer euphoria, massive profits and a seemingly unstoppable share price rise, the investor is now rattled by the big fall and uncertainty.
  • Looks like the recent announcements have not sunk into the investor psyche yet.
  • At a PE of 10 times, the valuation is at a 5 year low. With revenues and profits growing by 54% and 72% a year, the outlook is rosy. The forward dividend yield is 2.3%.
  • With these new announcements, and the Apple management working in the right direction, Apple today is a buy.

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Disclosure: It is safe to assume that if the JainMatrix website recommends a stock, the researcher has already invested in it, if he can (Apple isn’t listed in India) .

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