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Financial Forecasting: Three years of financial statements of Apple Tech.

Reema AL Hinawi

Trine University

Corporate Finance FIN 5063

Dr. Charlene Gayle

03/28/2024

Financial Forecasting: Three years of financial statements of Apple Tech.

Overview

The famous American tech company Apple Inc. creates, builds, and sells many different gadgets, software, and online services for people. Apple is one of the biggest companies in the world, with a market value of over $2 trillion. It was started by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1976. Apple makes smartphones (like the iPhone), computers (like the Mac), tablets (like the iPad), wearable tech (like the Apple Watch), and accessories. They also have many features, like Apple Music, iCloud, Apple Pay, and Apple TV+. Focusing on design looks, paying close attention to detail, and ensuring that hardware and software work together smoothly make Apple stand out. By integrating these features, Apple products perform better than similar-specified rivals. Apple's goods are widely used because they have polished, straightforward user interfaces (Wright, 2023).

Policies

Apple Inc. should make intelligent changes to its financial practices to keep growing and making money. First, it is essential to increase capital spending (capex) budgets. According to Diamandis and Kotler (2020), Apple can keep developing new products and technologies by putting more money into research and development (R&D). The company stays ahead of the competition by making new goods, improving old ones, and researching new technologies like augmented reality (AR) and self-driving cars. This is possible because it spends more on capital expenditures. This proactive method of investing keeps Apple at the cutting edge of new technology, which increases sales and keeps customers coming back.

Another essential part of Apple's changes to its financial policies is expanding its world marketing network. By putting money into entering new markets and areas, Apple can reach groups of customers it has not reached before and take advantage of rising demand for its goods. Apple's plan for growth includes opening more shops, working with local dealers, and using e-commerce sites to ensure that Apple goods can be bought worldwide. Not only does a giant delivery network increase sales, but it also improves the brand's position and gets customers worldwide more involved.

Apple must also invest in marketing and advertising campaigns to keep its brand relevant and increase buyer demand (Dörnyei, 2021). Apple can effectively tell target groups about the value proposition of its goods and services by putting more money into marketing efforts. Strategic advertising across multiple platforms, such as digital, paper, and TV, helps raise brand knowledge, encourages people to use a product, and increases sales. Investing in experienced marketing events and partnerships also builds brand loyalty and emotional ties with customers, strengthening Apple's position as a technology market leader.

Lastly, intelligent purchases shall allow Apple to broaden the range of products it sells and strengthen its community (Purnomo, 2023). Apple can buy companies that fit its long-term strategic strategy by looking for businesses that work well together or new technologies that are just starting to be used. These purchases not only help Apple make more products, but they also speed up creativity and market growth in essential areas. Apple also stays ahead by buying skilled teams and intellectual property. This helps the company keep growing in an industry that is changing quickly. Apple can deal with problems and take advantage of opportunities to grow and make money in the years to come by using innovative money management strategies focusing on capital expenditures, marketing, network expansion, and strategic acquisitions.

Assumptions in the Forecasting

Yearly revenue growth of 5%

Operating profit margin of 25%

Net Profit margin of 20%

Capital expenditures (Capex) of $10 billion per year

Dividends Payout at a rate of 25%

NPV and FV

I have assessed the worth of Apple Inc.'s forthcoming cash flows by employing the net present value (NPV) and future value (FV) equations. The NPV, representing the present value of all future cash flows discounted at a specified rate, is estimated to be $ 1.04 billion. Consequently, this suggests that the company's current stock price is underestimated by approximately 30%.

Intrinsic value of stocks = 104,572/350

= 298

Apple's current stock price is 173.31

Since the intrinsic value is higher than the market value, the stock is undervalued by about 42%; hence, there is a potential buying opportunity.

Cash Flow and Budget

Apple Inc. has much money to support its growth plans, with a strong cash flow projected to be more than $50 billion annually for the next five years. These funds can be used for research and development (R&D) to develop new goods, improve current ones, and look into new technologies. Apple's strong cash flow also allows it to spend on marketing, growing its global footprint, and making intelligent deals to strengthen its market position. The extra cash flow can also repay shareholders through bonuses or share buybacks. This increases the value of the shares owned by shareholders and boosts investor trust in the company's future.

Apple's budget prediction for the future is still strong, thanks to the fact that the company expects its sales to grow at a rate of 5% per year from 2025 to 2030. The growing smartphone market and the rising demand for other products, like personal tech and services, drive this growth. Apple can make money in many market segments by taking advantage of these market trends and using its strong brand and environment. Apple is ready to keep growing and give value to customers and owners in the coming years, thanks to its strict approach to budget management and strategic investment decisions.

References

Diamandis, P. H., & Kotler, S. (2020). The future is faster than you think: How converging technologies transform business, industries, and our lives. Simon & Schuster.

Dörnyei, K. R. (2021). Marketing professionals’ views on online advertising fraud. Journal of Current Issues & Research in Advertising, 42(2), 156-174.

Purnomo, Y. J. (2023). Digital marketing strategy to increase sales conversion on e-commerce platforms. Journal of Contemporary Administration and Management (ADMAN), 1(2), 54-62.

Wright, G. (2023, June). What is Apple? WhatIs.com. https://www.techtarget.com/whatis/definition/Apple