“Apple has wasted $100 billion on dividends and buybacks over the last 2 years (they’ve spent another $30 billion since the end of the year on the failed policy),” Eric Jackson writes for Forbes. “They should have used that money on M&A instead, in my view. If they had, I believe Apple’s stock would be $50/share higher than it is today.”
“In September 2012, Apple had a $560 billion market cap, $120 billion in cash, no debt, and $55 billion in trailing 12 months EBITDA. The stock price topped out that month around $100/share (in today’s dollars),” Jackson writes. “Today, Apple has a $654 billion market cap, $200 billion in cash, $55 billion in debt and $77 billion in trailing 12 months EBITDA. The stock price – as I write this – is $114/share. That’s obviously a 14% increase in the last 3 years – or about 4.6% a year. The Nasdaq is up about 57% over that time – or about 19% per year.”
“During this time, Apple has disgorged $130 billion in cash (had they done no capital return plan, they would now have $330 billion in cash on their balance sheet as Ben Evans tweeted last month). They’ve also added $55 billion in debt. It’s low cost debt – just like you might get from a credit card company for a 12 month teaser rate – but of course it needs to be paid back one day,” Jackson writes. “Besides the dividends which Apple has paid out, it’s reduced its share count by about 14%.”
“What does this all mean? It means that in exchange for a program that’s spent $130 billion cash and saddled the company with $55 billion in debt, after growing its profitability by about 50% over 3 years, Apple has been rewarded by Wall Street for listening to what it wanted by receiving a 4.6% annual increase in the stock price over a time when the Nasdaq clocked an average annual gain of 19%. And Apple’s multiple has shrunk to boot,” Jackson writes. “Congratulations, Tim Cook. You’ve truly gotten nothing for something.”
Much more in the full article here.
MacDailyNews Take: As Jackson points out, for $130 billion Apple could have tried to buy Facebook for $100 billion back after it got valued at $50 billion as well as Twitter and Tesla and have had money left over. If Apple had done so, what would AAPL be trading at today? Would any combination of those acquisitions have hurt Apple more that they helped? Certainly there are arguments pro and con for the whole idea of buybacks vs. acquisitions just as there are for Apple buying Facebook or Twitter vs. something like Tesla.