2012-08-21 AAPL%3DUS (Topeka Capita) The %24500B%2B Market Cap Fallacy Put to Rest%2C Next St...condensed).60691878

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IT HARDWARE & NETWORKING

August 21, 2012

Company Update Apple Inc. (AAPL - $665.15)RATING: Buy

Price Target: $1,111.00The $500B+ Market Cap Fallacy Put to Rest, Next Stop $1 Trillion

Brian J. White, [email protected]

Tel: 212-709-5730

Topeka Trading: 212-709-5750

STOCK DATA

Price $665.15

Price Target $1,111.00

Market Cap ($M) $629,936

52-Week Range $310.50 - $665.15

Shares (mil) 947.1

ADTV (000) 23,494Enterprise Value ($M) $512,715

Free Cash Flow ($M) $48,647.0

Dividend Per Share $10.60

Yield 1.6%

Debt To Capitalization 0%

FINANCIAL DATA

ROE 32.90%

Net Cash/ Share $123.77

Tangible Book Value $112.23

2012E 2013E 2014E

P/E Ratio 15.2x 13.5x 12.1x

REVENUE ($M)

FY September 2012E 2013E 2014E

Q1 46,333.0A 50,152.5E 56,560.2E

Q2 39,186.0A 40,076.5E 44,267.8E

Q3 35,023.0A 42,685.6E 47,048.6E

Q4 34,262.7E 42,583.5E 47,638.9E

FY 154,804.7E 175,498.1E 195,515.6E

EPS

FY September 2012E 2013E 2014E

Q1 13.87A 14.08E 16.25E

Q2 12.30A 11.17E 12.34E

Q3 9.32A 12.00E 13.13E

Q4 8.22E 11.89E 13.17E

FY 43.69E 49.14E 54.88E

EPS: 1. EPS denotes Pro Forma EPS

Summary

In June, analysts and market pundits expressed growing concern that Apple would succumb t

the $500 billion "market cap flu" and the stock would finally roll over. In a note on June 18, w

highlighted why we felt this was a fallacious argument and pointed out that investors shou

think of Apple's market cap in terms of "trillions" and not "billions". Based on our calculation

Apple is now the most valuable company ever, finally surpassing the market value of Microso

at the peak, and removing a key sentiment barrier for the stock.

Footnotes and disclaimers are contained in the second page of this report.


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IMPORTANT DISCLOSURES AND INFORMATION ABOUT THE USE

OF THIS DOCUMENTThis report has been prepared by Topeka Capital Markets (Topeka). Topeka is

broker-dealer registered with the SEC and member of FINRA, and Investor Protectio

Corporation (SIPC). Topeka Capital Markets is located at 40 Wall Street, Suite 170

New York, New York 10005.

Analyst CertificationThe recommendations and guidance expressed in the foregoing research repo

accurately reflect the personal views of Brian J. White who is principally responsib

for the preparation of this report about the subject security and issuer as of th

date of this report. No part of the compensation received by the analyst principal

responsible for the preparation of this report was, is, or will be directly, or indirectl

related to the specific recommendations or views contained in this research repor

Direct or indirect analyst compensation may be based on performance-relate

considerations associated with the recommendations and guidance expressed by th

analyst in this report.

Company Disclosures

For up-to-date company disclosures, please click on the following link or paste UR

in a web browser: www.topekacapitalmarkets.com

Topeka Capital Markets Inc. does not make a market in any of the securitie

mentioned in this report. Topeka Capital Markets Inc. and/or its affiliates an

employees may hold positions in the securities mentioned in this report. Howeve

none of those positions equal or exceed 1%. No analyst nor member of the

household, who participated in the creation of this report holds a position in an

securities issued by any company in this report.

Topeka Capital Markets Inc. and/or its affiliates has not provided Investment Bankin

services to the subject company in the past 12 months nor intends to seek any in the

month following publication of this report. We have no intent to solicit any compan

as a client in any manner.

The information and rating included in this report represent the long-term view a

described more fully below. The analyst may have different views regarding sho

term trading strategies with respect to the stocks covered by the rating, options o

such stocks, and/or other securities or financial instruments issued by the compan

Our brokers and analysts may make recommendations to their clients, and ou

affiliates may make investment decisions that are contrary to the recommendation

contained in this research report. Such recommendations or investment decisions ar

based on the particular investment strategies, risk tolerances, and other investmen

factors of that particular client or affiliate. From time to time, Topeka, and itrespective directors, officers, employees, or members of their immediate familie

may have a long or short position in the securities or other financial instrument

mentioned in this report. We provide to certain customers on request specialize

research products or services that focus on covered stocks from a particula

perspective. These products or services include, but are not limited to, compilation

reviews, and analysis that may use different research methodologies or focus on th

prospects for individual stocks as compared to other covered stocks or over differin

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aware that we may issue investment research on the subject companies from

Topeka Capital Markets Apple InAugust 21, 201

Footnotes and disclaimers are contained in the second page of this report. Page
http://www.topekacapitalmarkets.com/


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technical perspective and/or include in this report discussions about options o

stocks covered in this report and/or other securities or financial instruments issue

by the company. These analyses are different from fundamental analysis, and th

conclusions reached may differ. Technical research and the discussions concernin

options and other securities and financial instruments issued by the company do no

represent a rating or coverage of any discussed issuer(s). The disclosures concernin

distribution of ratings and price charts refer to fundamental research and do no

include reference to technical recommendations or discussions concerning option

and other securities and financial instruments issued by the company.

Option Specific Disclosures

Buying Options - Investors who buy call (put) options risk loss of the entire premiu

paid if the underlying security finishes below (above) the strike price at expiration

Investors who buy call or put spreads also risk a maximum loss of the premium paid

The maximum gain on a long call or put spread is the difference between the strik

prices, less the premium paid.

Selling Options - Investors who sell calls on securities they do not own risk unlimite

loss of the security price less the strike price. Investors who sell covered calls (sell cal

while owning the underlying security) risk having to deliver the underlying securitor pay the difference between the security price and the strike price, depending o

whether the option is settled by physical delivery or cash-settled. Investors who se

puts risk loss of the strike price less the premium received for selling the put. Investo

who sell put or call spreads risk a maximum loss of the difference between the strike

less the premium received, while their maximum gain is the premium received.

All calculations assume the positions are maintained until the expiration date of th

particular option illustrated unless otherwise stated. Note that short options ma

be assigned prior to expiration and result in returns higher or lower than thos

illustrated. Past performance should not be taken as an indication or guarante

of future results. Prices are subject to market fluctuations and to availability. A

with all option strategies, deviations from the reference prices due to market pricfluctuations may affect the ability to execute at stated prices and could cause return

to be different from those illustrated. Supporting documentation for any claim

(including any claims made on behalf of options programs or the options expertis

of sales persons), comparisons, recommendations, statistics or other technical dat

will be supplied upon request. Specific disclosures on any of the securities mentione

may be obtained by contacting Michael Gargano at 212-709-5705.

For options settled by physical delivery, the above risks assume the options buyer o

seller, buys or sells the resulting securities at the settlement price on expiry.

This material has been prepared by the Derivatives Strategy Team of Topeka Capit

Markets and is not meant to be viewed as a complete analysis of any security. Th

analysis is narrowly focused, and may be based either purely on quantitative modeor other unique factors such as market supply/demand factors surrounding potenti

market moving events. When making an investment decision this information shou

be viewed as just one factor in your investment decision process. Options tradin

involves a high degree of risk and is not suitable for every investor. Prior to buyin

or selling an option, a person must receive a copy of Characteristics and Risks o

Standardized Options (ODD). Copies of the ODD and OCC Prospectus are available b

calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacke

Drive, Suite 500, Chicago, Illinois 60606.




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Disclaimer

Information about our recommendations, holdings and investment decisions:

The information presented in this report is for informational purposes only. It wa

prepared based on information and sources that we believe to be reliable, but w

make no representations or guarantees as to the accuracy or completeness of th

information contained herein. This report is not to be construed as an offer to se

or a solicitation of an offer to buy any security. The opinions expressed in this repomay change without notice.

Topeka Capital Markets Inc. reports are intended for use by institutional investor

The securities discussed in Topeka Capital Markets Inc. research reports may not b

suitable for some investors. Investors must make their own determination as to th

appropriateness of an investment in any securities referred to herein, based on the

specific investment objectives, financial status and risk tolerance. Past performanc

is no guarantee of future results and the predictions made in this report may not b

met.

Topeka Capital Markets Inc. accepts no liability whatsoever for any loss or damage o

any kind arising out of the use of all or any part of this report. Topeka Capital Marke

Inc. specifically prohibits the re-distribution of this report by third parties, via thinternet or otherwise, and accepts no liability whatsoever for the actions of such thir

parties in this respect. Additional information is available to clients upon request.

Stock RatingsBuy - The stock is expected to trade higher on an absolute basis or outperform relativ

to the market or its peer stocks over the next 12 months.

Hold - The stock has average risk/reward and is expected to perform in line with th

market or its peer stocks over the next 12 months.

Sell - The stock is expected to trade lower on an absolute basis or underperform

relative to the market or its peer stocks over the next 12 months.

Ratings Distribution for Topeka Capital Markets as of August 21, 201Count % of to

Buy 32 50.79

Hold 24 38.10

Sell 7 11.11

Source: Topeka Capital Marke



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2012-08-21 AAPL%3DUS (Topeka Capita) The %24500B%2B Market Cap Fallacy Put to Rest%2C Next St...condensed).60691878