Using Capital Expenditures to predict Apple’s share price

“It takes money to make money. That’s a cliché. But it’s also true. The interesting question is how much can be gained from how little,” Horace Dediu reports for Asymco.

“In previous articles I explained how Apple’s expenditures of capital for equipment used in manufacturing affects their output of products,” Dediu reports. “The relationship between capital in and product out should stand to reason.”

Dediu reports, “The more surprising aspect of that analysis is that we get to know in advance how much Apple spends (since they tell us their budget a year before it’s spent.) and therefore it becomes possible to get a rough idea of how much they will produce. And since demand has generally been higher than supply we can get an estimate of how much Apple will sell. The only missing piece to this logic chain is to estimate how much will shareholders benefit from the capital expenditure. I’ll try to establish the relationship through a build-out of graphs.”

Read more in the full article – recommended – here.

[Thanks to MacDailyNews Reader “qka” for the heads up.]


    1. I doubt that. He’s always stated that he can’t predict Apple’s share price based on any standardized fundamentals. Apple trades in a black hole where normal physics doesn’t apply.

      1. Hmmm … Well the article cited here says that Apple’s share price moves in tandem with Apple’s capital outlays.  On other occasions Horace has used Apple’s cash and equivalents per share to explain (and forecast) Apple’s share price. On many occasions he has used trailing 12 month earnings. 

        So your claim that Horace doesn’t believe he can predict Apple’s share price strikes me as wrong, Laughing Boy.

  1. Horace Dediu’s article is outstanding. It makes you ‘Think Different’. Since Apple is selling all the products they can make, Android is simply expanding their future customer base.

  2. I saw this last night. The budgeted cap ex for the quarter is mind bogglingly huge. It foretells an enormous increase in revenue. It will be fascinating to learn how this turns out.

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