Apple Inc. ($AAPL) remains a titan in the tech world, but is its stock price a bargain or overpriced? Using two powerful valuation methods—Warren Buffett’s Discounted Cash Flow (DCF) and the McGrew Valuation Model—I’ve crunched the numbers to estimate AAPL’s intrinsic value per share. Below, I share the results, methodology, and insights, including why the McGrew model might sometimes outshine Buffett’s approach. Stick around to see if AAPL is a buy, hold, or sell, and let me know which stocks you’d like me to analyze next!
The Valuation Process and Data Sources
I relied on comprehensive financial data from SEC filings provided in uploaded documents, specifically AAPL’s quarterly cash flow and balance sheet statements. Free Cash Flow (FCF) was calculated by subtracting capital expenditures from operating cash flow, aggregated over fiscal years 2020–2024 (ending September 30). Shares outstanding (14.94 billion) were sourced from the latest balance sheet (03/31/2025). The last closing price of $201.45 was provided for June 10, 2025, and assumed to align with Yahoo Finance data. Growth projections used 3- and 5-year FCF Compound Annual Growth Rates (CAGRs) derived from the same filings.
Buffett Valuation Method
The Buffett method is a classic DCF approach, emphasizing predictable cash flows. Here’s how it played out for AAPL:
- FCF: I used AAPL’s 2024 FCF of $104.34 billion.
- Growth Rate: The 3-year FCF CAGR (2022–2024) was -1.54%, classifying AAPL as a stable stock (≤10% CAGR). Thus, I applied a conservative 5% growth rate for Years 1–10.
- FCF Projections: Starting at $104.34 billion, FCF grew to $169.96 billion by Year 10.
- Terminal Value: Using a 2.5% perpetual growth rate and 8% discount rate (4% Treasury + 4% premium), the Year 10 terminal value was $3.17 trillion.
- Present Value: Discounting all FCFs and the terminal value at 8% yielded a total intrinsic value of $2.47 trillion.
- Intrinsic Value per Share: Dividing by 14.94 billion shares gave $165.14.
- Price with 25% Margin of Safety: $165.14 × 0.75 = $123.86.
McGrew Valuation Method
The McGrew model is more dynamic for growth stocks but mirrors Buffett’s for stable ones. Here’s the breakdown:
- FCF CAGR: The 5-year FCF CAGR (2020–2024) was 9.82%, still ≤10%, so AAPL remained a non-growth stock. Thus, the McGrew valuation used the same 5% growth rate, 2.5% perpetual growth, and 8% discount rate as Buffett’s.
- Result: Identical to Buffett’s, with an intrinsic value of $165.14 per share and a margin-of-safety price of $123.86.
Why McGrew Can Be Higher
For growth stocks (CAGR >10%), the McGrew model starts with the historical CAGR in Year 1, linearly declining to 10% by Year 7, then holding steady through Year 10. This captures early high-growth phases better than Buffett’s flat 5% or 10% rate, potentially yielding a higher intrinsic value. For AAPL, the low CAGR (9.82%) kept both models aligned, but a stronger growth trajectory (e.g., 15% CAGR) could see McGrew’s projections soar, reflecting AAPL’s innovation-driven potential more aggressively.
Valuation Status
With an intrinsic value of $165.14, I compared AAPL’s $201.45 closing price to these thresholds:
- Screaming Buy: ≤$123.86 (0.75 × $165.14)
- Buy: $123.86–$153.58 (0.93 × $165.14)
- Hold: $155.23 (0.94 × $165.14)–$222.94 (1.35 × $165.14)
- Overvalued: >$222.94
At $201.45, AAPL falls in the Hold range, suggesting it’s fairly priced but not a steal. A dip below $155.23 could signal a buying opportunity.
Insights and Limitations
AAPL’s robust FCF ($104.34 billion in 2024) underscores its financial strength, but the negative 3-year CAGR (-1.54%) reflects short-term fluctuations in capital expenditures and working capital. The 5-year CAGR (9.82%) is more positive, yet still conservative for a tech giant. The 5% growth rate may undervalue AAPL’s potential, given its ecosystem dominance and AI advancements. Limitations include reliance on historical data without forward-looking analyst forecasts and the lack of adjustments for AAPL’s cash reserves or debt. The closing price wasn’t cross-checked with multiple sources due to user-provided data, which could affect accuracy if misaligned with market conditions.
AAPL’s intrinsic value of $165.14 suggests it’s a solid hold at $201.45, with potential upside if prices drop. The McGrew model’s flexibility could highlight higher values in high-growth scenarios, but AAPL’s stable profile aligns both methods here. Investors should monitor for price dips or stronger growth catalysts.
What stocks do you want me to run through these models? Comment below and let’s dive in!
The analysis of Apple Inc. ($AAPL) intrinsic value using Buffett and McGrew Valuation Methods is for informational purposes only, based on historical data and assumptions that may not reflect future performance, and is not financial advice; investors should conduct their own research and consult a financial advisor, as the author assumes no liability for losses.
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