Analysts: Apple’s cash machine makes the stock a bargain

“Many analysts are cheering Apple’s latest quarterly report, with Pacific Crest’s team upgrading their rating for the iPhone maker’s stock to overweight, and BTIG arguing the stock is cheap,” Victor Reklaitis reports for MarketWatch.

“In the wake of the earnings report, Pacific Crest analysts say Apple’s ‘dominant smartphone position’ and its ‘attractive valuation’ have prompted them to raise their rating for the stock to overweight from sector weight,” Reklaitis reports. “‘The smartphone is the most important consumer product ever, in our view,’ said Pacific Crest’s Andy Hargreaves and Evan Wingren in a note late Tuesday.”

“An analyst at BTIG highlights the fact that Apple is a cash-generating machine,” Reklaitis reports. “‘Apple is converting 30% of its revenue into free cash flow, generating $70 billion of free cash flow annually,” said Walter Piecyk in a note late Tuesday. “This implies an 11% FCF yield relative to its $650 billion market cap. That is simply too high of a yield given its market position, expectation of growth and high margins, regardless of the much lower level of revenue growth and EPS expectations for 2016… Even with no growth in EPS, we believe Apple’s valuation is too low based on cash generation.'”

Read more in the full article here.

MacDailyNews Take: The company keeps on doing what it’s doing, setting records, and the only stories that change are those from the so-called analysts. Time to allow the AAPL buoy to bob up now? The time to pile on in order to once again submerge AAPL under the weight of invented “concerns” looms as usual.

Apple beats Street with record fourth quarter results – October 27, 2015
Apple’s biggest problem: Wall Street – August 6, 2015
Apple pulverizes the Street with record third quarter results – July 21, 2015
Apple pounds Street with record second quarter iPhone and Mac sales – April 27, 2015
Apple destroys Street with all-time record earnings – January 27, 2015


  1. It’s a no brainer investment, in fact the only long term investemnt that will secure your future.

    Apple is making and selling (hand over fist) the only essential quality consumer products that last and work and shine.

  2. The thing is, the cash is partly used to offset debt and most of it is outside the U.S. and can’t be repatriated due to the U.S. tax law and its excessive rates, so it is reasonable to discount the impact of the cash holdings when it comes to stock valuation. However, should there be a tax holiday, the stock would jump as the cash would then be recognized in the
    valuation, ceteris paribus.

    1. When compared to the other companies in the market with large cash positions, they all have the same problem and have carry overseas cash balances. This is not unique to Apple yet they seem to be the only ones penalized for it

    2. There’s no “it can’t be repatriated” – it very easily can repatriated.

      Apple has billions of dollars overseas waiting, which it can easily afford spending a small percentage of to make the majority of accessible in the United States, any time it feels the need for money.

      Apple is simply choosing not to repatriate it, for simple business reasons. It thinks it will get even more money later by saving that overseas money for overseas expenses, and/or waiting for incentives to import the money.

      The US government can make those incentives, but they must do so carefully. The goal of any such tax incentive, from the nation’s perspective, is to raise revenue or stimulate the economy. It should not be done just to line the pockets of wealthy CEO’s. The 2004, Pre-Great Recession “tax holiday” under the Bush administration was a complete and spectacular failure in this regard. Our nation, my nation, and it’s people, has no need to repeat that particular failure.

      Should the US government choose to create more incentives for multinational companies to repatriate money, it sure as hell better do it in a fiscally responsible way that actually helps our economy.

    3. The cash isn’t used to offset debt. The debt is a way to return cash that is being held temporarily overseas. It can be repatriated, but Apple will wisely wait until Congress decides what it wants to do about tax reform.

      As for discounting the cash, as critic2 notes, other companies have large amounts of overseas cash, and are booking less tax on it, and are not being penalized as much as Apple, so your explanation doesn’t really seem to fit.

      If there’s a holiday, the stock will jump because Apple would likely recapture tax that it has already booked.

      Apple books a net effective rate of about 26%. It is conservatively booking US tax on about 2/3rds of its foreign cash. That’s already taken out of each quarter’s EPS. If there’s a tax holiday where the rate is lower than the rate Apple has booked then it’ll recapture the difference. The market should adjust appropriately, but we know they won’t, they’ll say that’s all in the past.

      Most companies, Google and Microsoft to name two peers with lots of foreign cash as well, don’t book nearly as much US tax on that foreign income. You can quickly see that in their net effective tax rates of about 20%. The market should be discounting their cash more than they discount Apple’s, since Apple has effectively booked all the potential US tax it would ever have to pay if it repatriated its cash at the current rate of 35%.

  3. There is a lot of Apple envy in the stock market. This has translated to many so-called “stock experts” consistently down grading Apple’s stock. What a crock. No matter what you think of the company, they make money. Stick with their stock. Anybody that does not understand that you keep stock of companies that make money is a moron.

  4. Any analyst who has changed their opinion from yesterday is admitting that they don’t know what they’re talking about because their analysis (the thing their job is based on) was wrong.

    If their predictions and “checks” were worth anything they would have stuck by what they were saying because they would have known roughly what Apple were going to announce, or at least be close.

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