Bernstein’s Sacconaghi: Most important for Apple is a capital allocation plan

“Bernstein Research‘s Toni Sacconaghi today chimes in with his thoughts on Apple‘s (AAPL) $137 billion cash pile, which is rising by $40 billion per year, noting that there is ‘a universal belief in the investment community’ that the money ‘is simply too high,’ and reiterating a view the company will do something to attract ‘incremental value investors,'” Tiernan Ray reports for Barron’s.

“Sacconaghi, who has an Outperform rating on the stock, and a $725 price target, cites a transformation in the shareholder cohort from growth funds to more value funds,” Ray reports. “The problem, of course, is the large overseas cash amount. The company has $43 billion here in the States, a ‘significant cash cushion.'”

Ray reports, “But Apple’s projected U.S.-based cash flow this year of $12.4 billion is actually $1 billion shy of the $13.4 billion he reckons the company needs to cover its $10 billion in planned dividend payments and the one-third of its planned share repurchases of $10 billion. He notes, means the company would have to either take on debt or pay taxes on repatriating the overseas holding.”

Read more in the full article here.


  1. All these idiots are so worried about how Apple is managing its money, what it is going to do with it, how big a dividend/buyback is going to be, and how Apple is going to pay for them.

    What they really should be worried about is Apple supply chain and new products and new markets. Apple has always handled its money well — even back in the dark days.

    1. New word in the English language.. EINHOLE!! (Sic) 🙂

      Dividend strategy is just one very small component of a stocks perceived value to investors.

      Re: Dividend policy – Many moons ago Merton H. Miller of the University of Chicago wrote a rather famous paper in which he pretty much stated that for the most part dividend policy does not matter.

      Apple is indisputedly generating pools of excess cash reserves and I can understand that perhaps paying out a little more of this would help generate more investor interest.

      However the dividends and the relatively small amount of payout is a very small component of why the stock has been suffering lately.

      I am more interested in what new products and growth markets Apple will be creating in the future without Steve Jobs’ involvement…

      This is really the big question that needs to be addressed.

      The rest is just academic BS and pennies on the dollar for the short term, deep pocketed “activist” penny hoarders

      If there is a slew of new products in the summer the stock will be flying high again – dividend or no dividend

  2. Einhorn is a doofus. He really wants Apple to repatriate billions of dollars, pay taxes it doesn’t need to pay (under current tax laws), just to give it out to shareholders? Exactly how does that strengthen the shareholders’ investment in Apple?

    It doesn’t. His “proposal” is strictly an attempt to make up for losses he probably has due to Apple’s stock share price fall, for which he and his fellow hedge fund managers are significantly to blame.

    Apple also has already announced a stock buy-back plan over a three year period, which will responsibly spend about $10B a year in rebuying stock. That would be giving money to shareholders.

    I still fail to see what is to bad about a company keeping a lot of cash in the bank rather than paying it to shareholders, because that cash can be used to pay for new HQs, data centers, acquisitions, better component prices, etc. etc.

    1. Thinking through my fingertips here…

      Wouldn’t it be okay for Apple to announce here’s what their plan for the cash at present levels is:
      1) $XXB cushion
      2) $XXB buy back
      3) $XXB new industry revolution
      4) $XXB plant equipment, etc.

      Just something, really big numbers with plenty of slop and broad categories that don’t hint at specific industries. In essence, here’s what we’ll let you see about our plans for this money, but obviously we can’t share details as that would tip-off potential copiers.

      It seems like today’s message of “Gosh we’ve got a lot of money and it’s awesome how much more we produced this quarter than ever before,” is not giving confidence to anyone.

      1. Whatever Apple does it will not give confidence to people who refuse to feel confident about Apple, so Apple might as well carry on ignoring them and just concentrate on the little details like earning more money than any other company does and building it’s future on rock solid foundations.

  3. I’m confused: didn’t he just say that Apple has $43B already in the U.S.? Why would Apple need to borrow or bring cash from overseas if the 2013 U.S. cash is a billion short? Just grab it from the $43B couch cushion fund!

    What a moron!

  4. Let me summarize theatricals above for you:

    Sagnocchi demands that Apple fork over its cash to big institutional stockholder like Bernstein and to hedge funds like Einhorn’s so that they can snort billions of money for nothing. They could give a rats’ what that would do to Apple. All that matters is that they make easy, obscene profits for having put in no effort besides showing up on CNBC and spewing hot air.

    Code word: greed.

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