Bernstein analyst Sacconaghi: $50-$100 billion of debt might be ‘attractive option’ for Apple

“Bernstein Research’s Toni Sacconaghi today reiterates an Outperform rating on Apple (AAPL) shares and a $600 price target, and muses on whether the company should perhaps issue $50 billion to $100 billion worth of debt if it plans to return cash to shareholders through on ongoing dividend,” Tiernan Ray reports for Barron’s.

If Apple were to choose to pay a 40% payout, $50B in debt would enable the company to support such a dividend for nearly 20 years, giving it considerable time to wait for a change in tax law that would enable more favorable access to offshore cash or cash generated offshore. Moreover, we also believe that accessing inexpensive financing at historically low rates makes eminent sense for financial flexibility, particularly since Apple holds no debt today. – Bernstein Research analyst Toni Sacconaghi

Ray reports, “Sacconaghi notes $50 billion would be the largest ever single debt raise, with close approximations being Roche’s $33 billion issue in 2009.”

Read more in the full article here.

MacDailyNews Take: Oh, for the love of Jobs! Toni ought to get to work on his price target before it looks even more ridiculously low and leave the cash management to the professionals at Apple Inc.

Go look for your missing iPhones, Toni.

45 Comments

  1. There keeps being this silliness about Apple paying taxes to repatriate international profits. The fact is that Apple will NEVER bring those funds into the U.S. so long as it will be heavily taxed by doing so. It will simply keep that cash offshore and use it to build new Apple stores, make payments to Foxconn, buy Israeli companies, etc. There’s no need to bring it back to the U.S. just to pay taxes or keep it in the U.S.

    Plus, it can be very difficult doing international business from U.S. banks due to federal regulations placed on U.S. banks since 9/11. Many international businesses and banks won’t even work with U.S. based banks, even the largest ones. Therefore it is actually financially beneficial for Apple to keep a large part of its cash offshore.

  2. That is what I like of the Analyst, they always know what to do whit the money they didn’t make.
    As long as it is some body’s else money, they know what to do. I bet they don’t have such a big planes for their own money.

  3. 1) I would like Apple to pay dividends.
    Yes apple’s growth is better than the paltry dividends given by other companies. But even a small dividend will increase the market for apple shares as many dividend mutual funds etc cannot buy aapl (I believe some of these funds are asking Cook to do this, they have already exhausted their non dividend fund allocations for aapl). More buyers better for aapl price, better stability (dividend owners usually don’t buy and dump like manipulators).

    2) don’t want dividends to jeopardize Apple’s ‘war-chest’. Use only cash amounts not needed for strategic aims like buying companies, bulk purchases etc.

    3) although this debt thing makes traditional business sense as Apple doesn’t have to take it’s overseas cash back and pay taxes (two thirds of apple’s profits is from overseas sales) I’m leery of borrowing from banks.

    For 50 b the banks will have CONDITIONS. Do we want bank managers (like Goldman Sachs) overseeing Apple’s decisions? Nope. (remember Donald Trump years ago? how the banks whom owed billions had tied his hands? Bank managers were controlling his moves – they even controlled his personal spending ‘allowance’ for meals, entertainment etc! . Finally he had to scream at them to let him do his ‘thing’ otherwise they would never see their loans again. Yeah, donald’s example is extreme as he was defaulting but still I don’t want bank managers checking Apple’s decisions. )

    4) Finally: for now i trust Cook. He’ll make the right decisions. Give him TIME to sort everything out.

  4. I can’t understand why so many third-parties are so obsessive over what Apple does with its cash. it’s not as though Apple is required to do anything with it if the company is healthy and the stock price continues to climb. A company like Apple must be fairly unusual, so I guess they know what they’re doing. Apple seems to be rewriting the rule book of success, so maybe it doesn’t need to do the things other companies routinely do.

    I truly believe that as long as Apple continues to build very good products and offer good customer service, the company will thrive. Maybe its ultimate market share for any particular product may top out a sustainable 50% but that’s damn good if you’ve got several products. No company can grow indefinitely, so sustaining sales at some point in the future will just have to do. At that point, a dividend will likely come into play. However, Apple is definitely not yet at that point.

  5. There’s a dark side to this story. Same as the calls for dividends.

    Apple’s cash is only earning money for itself. The stock market wants to get their greedy hands on the cash. So they are proposing any approach to get it.

    Both dividends and borrowing means that the market will profit from the transactions. They hate not being able to control the game. Apple is a law to themselves and because they have no debt the market can’t push them around.

    Apple doesn’t need to borrow money to do anything. Why borrow cash at 5-10% interest when they can use their own.

    I would like a dividend but not if it puts Apple into those greedy bastards hands.

  6. Despite the irrational objections raised by some in this forum, I maintain that, in the general case, debt is a tool that can be beneficial, when handled properly. Whether or not Apple should engage in borrowing money depends on the specific situation – there is no blanket rule because it depends upon many factors.

    With respect to borrowing money to pay a dividend, I repeat my objection to that very poor idea.

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