Apple Scenario DCF

For informational and educational purposes only • Not investment advice.

Apple

iPhone, services, devices

Expected Fair Value

$194.91

Stock price: $333.69

Fair value below stock price

This model estimates value under Bear, Base and Bull scenarios and combines them using assigned probabilities. It shows a range of possible outcomes rather than one exact prediction.

Scenario Fair Value Range

Bear, Base and Bull outcomes compared with expected value and current price.

Key Valuation Metrics

Time Horizon

Bear Probability

Range: 0–100%

Base Probability

Range: 0–100%

Bull Probability

Range: 0–100%

Equity Risk Premium

Range: 2–10%

Scenario DCF Formulas

Each Bear, Base and Bull scenario is valued using the standard Discounted Cash Flow framework. The final result is the probability-weighted average of the three scenario valuations.

Enterprise Value

\text{Enterprise Value} = \sum_{t=1}^{n} \frac{FCF_t}{(1+WACC)^t} + \frac{\text{Terminal Value}}{(1+WACC)^n}

Terminal Value

\text{Terminal Value} = \frac{FCF_{n+1}} {WACC-g}

Fair Value per Share

\text{Fair Value Per Share} = \frac{ \text{Enterprise Value} - \text{Net Debt} }{ \text{Shares Outstanding} }

Expected Fair Value

\text{Expected Fair Value} = Probability_{Bear} \times Value_{Bear} + Probability_{Base} \times Value_{Base} + Probability_{Bull} \times Value_{Bull}

What is Scenario DCF?

A Scenario Discounted Cash Flow (Scenario DCF) valuation estimates a company's intrinsic value under several possible future outcomes rather than relying on a single forecast. Instead of assuming one set of growth, discount rate and terminal growth assumptions, the model evaluates Bear, Base and Bull scenarios independently.

Each scenario is valued using a complete Discounted Cash Flow model. The individual valuations are then combined using their assigned probabilities to produce one probability-weighted expected fair value. This approach explicitly incorporates uncertainty and provides a range of plausible outcomes rather than a single point estimate.

How the Scenario DCF Model Works

The Scenario DCF estimates a company's value under three possible future outcomes. Each scenario is valued independently using a full Discounted Cash Flow model before combining the results into one probability-weighted Expected Fair Value.

Create Scenario Assumptions

Bear

Base

Bull

WACC, Revenue Growth & Terminal Growth

→

Run a DCF Valuation
for Each Scenario

Forecast Revenue
Estimate FCF Margin
Calculate Free Cash Flow
Discount Cash Flows
Calculate Terminal Value

→

Calculate
Expected Fair Value

=
Σ (Scenario Value × Scenario Probability)

Key Model Assumptions

• Three scenarios (Bear, Base and Bull) represent a range of possible future outcomes.
• Each scenario is valued independently using a complete Discounted Cash Flow model.
• Current Revenue and Free Cash Flow use trailing twelve-month (TTM) values when available, with the latest annual values used as a fallback.
• If current Free Cash Flow is negative or materially different from recent history, the model uses the average of the last three positive annual Free Cash Flow values as a normalized starting point.
• Revenue Growth gradually moves toward the Terminal Growth Rate, while the Free Cash Flow Margin moves toward a normalized target based on the median of up to the five most recent valid historical Free Cash Flow Margins.
• Future Free Cash Flows are discounted using each scenario's estimated WACC.
• The Risk-Free Rate is based on the U.S. 10-Year Treasury yield published by the Federal Reserve Board.
• Scenario probabilities adjust automatically so Bear, Base and Bull add up to 100%.
• The final valuation is the probability-weighted average of the three scenario values.

Step 1 — Define Bear, Base and Bull Assumptions

Base Revenue Growth = Historical Revenue CAGR

Revenue Growth Scenarios

Bear: 13.1% − (40% × 13.1%) = 7.9%

Base: 13.1%

Bull: 13.1% + (40% × 13.1%) = 18.4%

WACC Scenarios

Bear: 10.4% + 1.0% = 11.4%

Base: 10.4%

Bull: 10.4% − 1.0% = 9.4%

Terminal Growth Scenarios

Bear: 2.5% − 1.0% = 1.5%

Base: 2.5%

Bull: 2.5% + 1.0% = 3.5%

The Scenario DCF begins with a Base case using the company's historical revenue growth, estimated WACC, and long-term Terminal Growth Rate.

The Bear and Bull cases are then created by adjusting these Base assumptions. The Bear scenario uses slower revenue growth, a higher WACC, and lower Terminal Growth, while the Bull scenario uses faster revenue growth, a lower WACC, and higher Terminal Growth.

These adjustments create three consistently ordered valuation cases. The complete Revenue Growth, WACC, and Terminal Growth assumptions for all three scenarios can be compared in the Scenario Summary Table.

Step 2 — Project Revenue in Each Scenario

Revenueₜ = Revenueₜ₋₁ × (1 + Revenue Growthₜ)

Bear Revenue Growth: 7.9%

Base Revenue Growth: 13.1%

Bull Revenue Growth: 18.4%

The model projects Revenue separately for the Bear, Base and Bull scenarios. Each scenario begins with its own initial Revenue Growth Rate.

Over the forecast period, each scenario's Revenue Growth gradually moves toward its Terminal Growth as the company matures. This creates a lower Revenue path in the Bear scenario, a central path in the Base scenario, and a higher path in the Bull scenario.

The complete yearly Revenue Growth Rates and projected Revenue for the Base scenario can be seen in the Base Scenario Projection Table.

Step 3 — Estimate Free Cash Flow

Free Cash Flowₜ = Revenueₜ × FCF Marginₜ

FCF Margin Development

Starting FCF Margin: 29.3%

Normalized Target FCF Margin: 26.0%

The same FCF Margin path is applied to the Bear, Base and Bull scenarios.

After Revenue is projected, the model estimates Free Cash Flow by multiplying projected Revenue by the corresponding FCF Margin.

The FCF Margin gradually moves from the Starting FCF Margin of 29.3% toward the normalized Target FCF Margin of 26.0% throughout the forecast period.

The same FCF Margin path is used in the Bear, Base and Bull scenarios. Their projected Free Cash Flows still differ because each scenario produces a different Revenue forecast.

The yearly Base scenario Revenue, FCF Margin and resulting Free Cash Flow can be seen in the Base Scenario Projection Table.

Step 4 — Discount Future Free Cash Flows

Present Valueₜ = Free Cash Flowₜ / (1 + WACC)^t

Bear Present Value of Forecast Cash Flows:
$1031.2B

Base Present Value of Forecast Cash Flows:
$1320.0B

Bull Present Value of Forecast Cash Flows:
$1698.6B

Each projected Free Cash Flow is discounted back to its present value using that scenario's WACC. A higher WACC produces lower present values, while a lower WACC produces higher present values.

The values above show the total Present Value of the forecast Free Cash Flows for the Bear, Base and Bull scenarios.

The yearly Discount Factors and resulting Present Values for the Base scenario can be seen in the Base Scenario Projection Table.

Step 5 — Calculate Terminal Value

Terminal Cash Flow = Final Forecast FCF × (1 + Terminal Growth)

Terminal Value = Terminal Cash Flow / (WACC − Terminal Growth)

PV Terminal Value = Terminal Value / (1 + WACC)¹⁰

Bear Present Value of Terminal Value:
$707.5B

Base Present Value of Terminal Value:
$1356.2B

Bull Present Value of Terminal Value:
$2749.0B

The Terminal Value estimates all cash flows expected after the explicit forecast period. It is calculated separately for each scenario using that scenario's final forecast Free Cash Flow, WACC and Terminal Growth Rate.

Because the Terminal Value represents value at the end of the forecast period, it is discounted back to its present value using the scenario's WACC.

The Present Value of the Terminal Value for each scenario can be compared in the Scenario Summary Table.

Step 6 — Calculate Enterprise Value

Enterprise Value = PV Forecast FCFs + PV Terminal Value

Bear:
$1031.2B + $707.5B = $1738.7B

Base:
$1320.0B + $1356.2B = $2676.2B

Bull:
$1698.6B + $2749.0B = $4447.6B

Enterprise Value is calculated separately for the Bear, Base and Bull scenarios by adding the present value of forecast Free Cash Flows to the present value of the Terminal Value.

This represents the estimated value of the company's operating business before considering debt and cash.

The Present Value of Forecast Free Cash Flows, Present Value of Terminal Value and resulting Enterprise Value for each scenario can be compared in the Scenario Summary Table.

Step 7 — Calculate Equity Value and Fair Value per Share

Equity Value = Enterprise Value − Net Debt

Fair Value per Share = Equity Value / Shares Outstanding

Bear:
Equity Value = $1738.7B − $21.9B = $1716.7B
Fair Value per Share = $1716.7B / 14.69B = $116.89

Base:
Equity Value = $2676.2B − $21.9B = $2654.3B
Fair Value per Share = $2654.3B / 14.69B = $180.72

Bull:
Equity Value = $4447.6B − $21.9B = $4425.7B
Fair Value per Share = $4425.7B / 14.69B = $301.33

To determine the Equity Value attributable to shareholders, Net Debt is deducted from each scenario's Enterprise Value.

The Equity Value in each scenario is then divided by Shares Outstanding to calculate the Bear, Base and Bull Fair Values per Share.

If a scenario produces a negative Equity Value after deducting Net Debt, the Fair Value per Share is shown as zero rather than a negative share value.

Because Net Debt or Net Cash and Shares Outstanding remain unchanged across the scenarios, differences between the scenario values result from their different Revenue Growth, WACC and Terminal Growth assumptions.

The resulting Equity Values and Fair Values per Share can be compared in the Scenario Summary Table.

Step 8 — Calculate Expected Fair Value

Expected Fair Value = Σ (Scenario Value × Scenario Probability)

Bear Contribution:
$116.89 × 25.0% = $29.22

Base Contribution:
$180.72 × 50.0% = $90.36

Bull Contribution:
$301.33 × 25.0% = $75.33

Expected Fair Value:
$29.22 + $90.36 + $75.33 = $194.91

The final Scenario DCF value is the probability-weighted average of the Bear, Base and Bull Fair Values.

Each scenario contributes to the Expected Fair Value according to its assigned probability. Increasing a scenario's probability therefore increases the influence of that scenario's Fair Value on the final result.

The probability and Fair Value of each scenario, together with the final Expected Fair Value, can be seen in the Scenario Summary Table.

Scenario Summary Table

This table compares the assumptions and valuation results for the Bear, Base and Bull scenarios. The final Expected Fair Value is calculated from each scenario's Fair Value and assigned probability.

Scenario	Probability	Revenue Growth	Terminal Growth	WACC	PV Forecast FCF	PV Terminal Value	Enterprise Value	Equity Value	Fair Value
Bear	25.0%	7.9%	1.5%	11.4%	$1031.2B	$707.5B	$1738.7B	$1716.7B	$116.89
Base	50.0%	13.1%	2.5%	10.4%	$1320.0B	$1356.2B	$2676.2B	$2654.3B	$180.72
Bull	25.0%	18.4%	3.5%	9.4%	$1698.6B	$2749.0B	$4447.6B	$4425.7B	$301.33
Expected Fair Value $116.89 × 25% + $180.72 × 50% + $301.33 × 25% = $194.91
Current Stock Price: $333.69
Expected Upside / Downside: -41.6%

Base Scenario Projection Table

The table below shows the complete Base scenario forecast, including yearly Revenue Growth, projected Revenue, Free Cash Flow Margin, projected Free Cash Flow, Discount Factors and Present Values.

Year	Revenue Growth	Projected Revenue	FCF Margin	Projected FCF	Discount Factor	Present Value
Y1	13.1%	$528.1B	29.3%	$154.6B	0.906	$140.1B
Y2	12.7%	$595.4B	29.2%	$173.6B	0.821	$142.5B
Y3	12.0%	$667.0B	28.9%	$193.0B	0.744	$143.5B
Y4	11.1%	$741.0B	28.6%	$212.3B	0.674	$143.0B
Y5	10.0%	$815.0B	28.3%	$230.7B	0.611	$140.8B
Y6	8.7%	$886.1B	27.9%	$247.4B	0.553	$136.8B
Y7	7.3%	$951.2B	27.5%	$261.4B	0.501	$131.0B
Y8	5.8%	$1006.8B	27.0%	$272.0B	0.454	$123.5B
Y9	4.2%	$1049.3B	26.5%	$278.2B	0.411	$114.5B
Y10	2.5%	$1075.5B	26.0%	$279.4B	0.373	$104.2B
Total Present Value of Forecast Free Cash Flows						$1320.0B
Terminal Value	2.5%	$1075.5B	26.0%	$286.4B	0.373	$1356.2B
Terminal Value = $286.4B / (10.4% − 2.5%) = $3638.5B before being discounted back to $1356.2B.
Enterprise Value PV Forecast Cash Flows + PV Terminal Value						$1320.0B + $1356.2B = $2676.2B
Net Debt						$21.9B
Equity Value Enterprise Value − Net Debt						$2676.2B − $21.9B = $2654.3B
Fair Value per Share = Equity Value / Shares Outstanding $2654.3B / 14.69B shares = $180.72