CNBC “Squawk Box” Interview: AAPL Investment Discussion

Market Cap Breaks $700bn – iPhone6 Upgrade Cycle Expected To Boost $130bn Shareholder Value Program – Shares Attractive:

Yesterday I joined CNBC’s “Squawk Box” to talk about AAPL. Thanks to Michelle Caruso Cabrera, Andrew Ross Sorkin and Scott Wapner for having me on.

Discussion Points:

1) Swiss Franc Denominated Debt Attractive For Top-rated Corporate Issuers, AAPL Borrows $1.35bn for Average 10+-years At 0.488% Average Rate: In the spirit of Willie Sutton’s predilection for robbing banks (i.e. “because that where the money is”), AAPL is capitalizing on its overall balance sheet strength to borrow long-term capital at highly favorable rates. The fact that the Swiss National Bank (SNB) is now offering depositors negative interest rates (i.e. you have to pay to have funds on deposit with SNB) has created a funding opportunity for top-rated corporates such as AAPL to borrow funds at highly favorable rates for relatively long maturities.

2) iPhone6 Upgrade Cycle Most Likely Propels AAPL To Top Vendor Spot in PRC for 1Q15: Note that demand for the iPhone6+ catapulted AAPL to be #1 in CY4Q14 handset shipments in PRC. With the Chinese New Year holiday coming on 2/19/15, it is not out of the question that AAPL can extend its PRC leadership into CY1Q15, especially given that the company’s alliance with China Mobile has only just reached its 1-year anniversary. In broader terms, the iPhone6 upgrade cycle may be expected to boost the current iPhone installed user base of 404mm to 650mm by 2018, a penetration that will represent only 33% of the estimated 1.82bn premium smartphone subscribers.

3) AAPL Valuation Attractive With Price-To-Earnings Growth (PEG) Multiple of 0.75x: Should iPhone6 upgrade cycle have more room to run, valuation can expand from the current price-to-earnings-growth (PEG) multiple of 0.75x to 1.0x, which would result in a share price of $163, a 34% upside to the stock from the current $122.