Apple Inc.AAPLNASDAQ
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DCF Valuation
DCF Valuation Summary
Hold
Fair Value: $238.26 per share(market-calibrated)
-9.9%
Upside to Fair Value
Current
$264.35
Pure Model
$234.21
Fair Value
$238.26
Bull Case
$311.27
Bear Case
$171.50
Market Reality Check
Model Terminal Growth
3.75%
Market-Implied Growth
5.99%
Calibrated Growth
4.09%
Fair value uses 85% model / 15% market-implied terminal growth. Pure model: $234.21.
What's Driving This Ratingfor AAPL
✓
CapEx already efficient
CapEx at 2.64% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.
✓
Premium margins already priced in
EBIT margin of 31.13% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.
↑
Strong near-term revenue growth
Analyst consensus projects 11.17% revenue growth in Year 1, fading to 17.21% by Year 5 and 3.75% by Year 10. Revenue reaches $874.0B by Year 10 (vs $416.2B today).
↔
Perpetuity and exit methods disagree
Perpetuity growth gives $178.93/share (18.8x terminal FCF) while exit multiple gives $289.50/share (36.5x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.
🎯
Market pricing in higher long-term growth
To justify $264.35, the market implies 5.99% perpetual growth — 224bps above the model's 3.75%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.
✓
Strong cash flow conversion
Year 10 FCF/EBITDA conversion of 76.79% indicates efficient cash generation. FCF reaches $227.3B by Year 10 (26.01% FCF margin).
Weighted Average Cost of Capital (WACC)
Cost of Equity (CAPM)
Risk-Free Rate (Rf)4.50%
Beta (β)1.11
Market Risk Premium4.50%
*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)
Cost of Equity (Re)9.48%
Cost of Debt
Pre-tax Cost of Debt1.69%
Tax Rate15.61%
After-tax Cost of Debt1.43%
Equity Weight (E/V)97.23%
Debt Weight (D/V)2.77%
WACC Calculation
WACC = (E/V × Re) + (D/V × Rd × (1-Tc))
WACC = (97.23% × 9.48%) + (2.77% × 1.43%)
= 9.26%
10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)
| Year | Year 1 | Year 3 | Year 5 | Year 7 | Year 10 |
|---|---|---|---|---|---|
| Revenue | $462.7B | $521.8B | $566.2B | $725.1B | $874.0B |
| EBIT | $144.0B | $162.4B | $176.2B | $225.7B | $272.0B |
| Tax | $22.5B | $25.4B | $27.5B | $35.2B | $42.5B |
| NOPAT | $121.5B | $137.1B | $148.7B | $190.5B | $229.6B |
| + Depreciation | $12.7B | $14.3B | $15.5B | $19.9B | $24.0B |
| - Capex | $12.2B | $13.8B | $14.9B | $19.1B | $23.1B |
| - Δ NWC | $4.6B | $2.8B | $8.3B | $7.7B | $3.2B |
| Free Cash Flow | $117.4B | $134.7B | $141.0B | $183.5B | $227.3B |
| Discount Factor | 0.915 | 0.767 | 0.642 | 0.538 | 0.413 |
| Present Value | $107.4B | $103.3B | $90.6B | $98.8B | $93.8B |
FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital
Terminal Value Calculation
Perpetuity Growth Method
Year 10 FCF$227.3B
Terminal Growth Rate3.75%
WACC9.26%
TV = FCF₁₀ × (1+g) / (WACC-g)
Terminal Value$4.3T
PV of Terminal Value$1.8T
Exit Multiple Method
Year 10 EBITDA$296.0B
Exit Multiple (EV/EBITDA)28.0x
TV = EBITDA₁₀ × Exit Multiple
Terminal Value$8.3T
PV of Terminal Value$3.4T
Valuation Summary
Perpetuity Growth Method
PV of Projected FCFs$985.3B
PV of Terminal Value$1.8T
Enterprise Value$2.8T
(-) Net Debt$76.4B
Equity Value$2.7T
Shares Outstanding14.9B
Price per Share$178.93
Exit Multiple Method
PV of Projected FCFs$985.3B
PV of Terminal Value$3.4T
Enterprise Value$4.4T
(-) Net Debt$76.4B
Equity Value$4.3T
Shares Outstanding14.9B
Price per Share$289.50
Pure Model Fair Value
$234.21
Average of perpetuity growth and exit multiple methods (before market calibration)
Sensitivity AnalysisPrice per Share
| WACC ↓ / Growth → | 2.75% | 3.25% | 3.75% | 4.25% | 4.75% |
|---|---|---|---|---|---|
| 7.26% | $291.36 | $302.55 | $316.94 | $336.10 | $362.90 |
| 8.26% | $253.68 | $260.42 | $268.66 | $278.96 | $292.19 |
| 9.26% | $224.66 | $229.04 | $234.21 | $240.42 | $248.01 |
| 10.26% | $201.22 | $204.22 | $207.68 | $211.72 | $216.48 |
| 11.26% | $181.69 | $183.83 | $186.25 | $189.01 | $192.20 |
How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.
Scenario Analysis
Bear Case
$171.50
-35.1% vs current
- • -25% vs analyst consensus
- • Terminal growth: 3.3%
- • Beta: 1.38
Base Case
$234.21
-11.4% vs current
- • Analyst consensus
- • Terminal growth: 3.8%
- • Beta: 1.11
Bull Case
$311.27
17.7% vs current
- • +25% vs analyst consensus
- • Terminal growth: 4.3%
- • Beta: 0.94
Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector
Growth Assumptions (Select Years)
Year 1 Revenue Growth11.17%
Year 3 Revenue Growth5.76%
Year 5 Revenue Growth17.21%
Year 7 Revenue Growth11.83%
Year 10 Revenue Growth3.75%
Terminal Growth Rate3.75%
Margin & Efficiency
Current EBIT Margin31.13%
Terminal EBIT Margin31.97%
Tax Rate15.61%
Historical Capex / Rev2.64%
NWC / Revenue10.00%
Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.
Institutional-Grade Methodology
Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta
Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)
This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.