In its recent 10-K filing, Apple Inc. (NASDAQ:AAPL) provided disclosures around capital expenditure plans for Financial Year 2013, along with purchase obligations, similar to prior years. In the past, both these items have seen a strong correlation with the number of iOS devices sold in the next 12 months. As such, after reviewing CapEx guidance, Credit Suisse research firm find that iOS numbers could prove conservative.
It looks like, Apple’s plans for 2013 are nearly identical to what it had planned for 2012. The company opened 33 new stores this year, bringing Apple Inc. (NASDAQ:AAPL) to a total of 390 stores worldwide. Of the 33 stores opened in 2012, 5 were opened in the U.S.
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Apple Inc. (NASDAQ:AAPL)’s recent 10-K filing points to the company continuing to invest for a significant level of growth. According to a report from Credit Suisse, Apple should deliver a robust EPS CAGR of 25% FY12-14, driving $75 of long term earnings power. Trading on a P/E of 10x our CY13 EPS of $60, shares are inexpensive, given the growth profile and $128 of net cash/share.
Per the 10-K filing, Apple Inc. (NASDAQ:AAPL) has committed to purchase obligations of $21.1bn (+51% yoy) over the next 12 months. This is important, given a solid historic correlation between purchase obligations and iOS volumes shipped over the next year (average of $66 per device over FY10-12). Credit Suisse’s analysts believe, If this relationship continues to hold true, it suggests that Apple will ship 317mn iOS devices in FY13 (iPhone, iPad, iPod Touch), 11% above their 285mn estimate.
As per the report, Apple Inc. (NASDAQ:AAPL) expects CapEx (ex-retail) of $9.15bn in FY13, down 3% vs. reported CapEx in FY12. While this looks disappointing vs. reported growth of 137% in FY12, Credit Suisse analysts believe even this guidance could imply an upside to iOS volumes. The firm notes that last year’s CapEx may have been inflated by a one-time uptick in purchasing equipment and securing capacity at suppliers. Adjusting for this, and using a CapEx per iOS unit of $32 (in line with the FY10-11 average), suggests iOS units of 288mn (1% higher than firm’s estimate of 285mn). Furthermore, Apple has traditionally overspent guidance by an average of 32%, ex-retail, over the last 3 years, lending further conservatism to estimates.
China is delivering on EM potential. As per the 10-k filing, Apple Inc. (NASDAQ:AAPL) is planning to open 30-35 new stores during FY13, with 75% outside the US, which would take its store count from 390 to 425. With Apple’s China revenue up 83% yoy in FY12 to $21bn, the firm believes the company will have captured 40% of its LT opportunity in China alone (~$40bn by 2015). Through retail and carrier expansion in EMs, Apple Inc. (NASDAQ:AAPL) can drive an incremental $87bn in sales and $21 EPS through 2015.
Apple Inc. (NASDAQ:AAPL) is currently trading at a share price of $591.15.