UBS: Buy Apple as company could acquire more than $120 billion of its stock in two years

“Apple’s capital return program will get much larger, according to one Wall Street firm,” Tae Kim reports for CNBC. “UBS reiterated its buy rating for Apple shares, saying the recently passed tax reform bill will free up new funds for the company’s shareholder return program.”

“‘Apple clearly is a beneficiary of overseas cash repatriation,’ analyst Steven Milunovich wrote in a note to clients Monday. ‘Repatriation of ~$250bn of offshore cash should increase the rate of Apple’s share buybacks since the company believes the stock remains attractive in that its services business is undervalued,'” Kim reports. “Milunovich reaffirmed his $190 price target for Apple shares, representing 9 percent upside to Friday’s close.”

“He estimates repatriation will unleash an incremental $25 billion and Apple’s annual free cash flow will stay around $60 billion,” Kim reports. “As a result, Milunovich believes the company could buy back $122 billion worth of its shares through 2019.”

Read more in the full article here.

MacDailyNews Take: Yup.

Think buybacks and dividends, not major acquisitions.MacDailyNews, January 5, 1018

Another $125 billion in buybacks would be seismic.MacDailyNews, November 18, 2016


    1. decreases and the current holders therefore, get a bigger piece of the pie, b/c the actual pie (# of shares) hasn’t changed. Someone may say this more eloquently/properly?

      1. Sorry, # of Holders, but the number of outstanding AAPL shares does change – it goes down as GeoX states. Every company has a specified number of shares that it can issue (this number can be updated, if needed, such as in a major stock split). A company issues new shares to acquire money for expansion, such as in an IPO. As the number of outstanding shares increases, the ownership is diluted. Thus the value of the company is spread across a larger number of shares.

        In a stock buyback, a company does the reverse. It has the resources to buy back shares from the open market and has determined that this is a better use of its free cash than expansion or acquisitions. This does not necessarily mean that the number of shareholders goes down, though. You could still have a large number of people holding small amounts of AAPL. But the total number of AAPL shares will decrease. Assuming that the market cap of Apple remains roughly the same, each share becomes worth more – a slightly larger slice of the pie.

        Things are actually a bit more complex than that because Apple, like many corporations, awards shares to its management. Apple may also offer profit sharing/incentives to its employees, as well – I don’t know. In any event, this process results in a gradual dilution of the company across a larger number of shares. If the company value rises faster than the number of shares, then the stock price keeps rising. In this case, Apple can offset the potential share dilution and even reduce the number of outstanding shares.

        An important consideration of stock buybacks as opposed to a special dividend or dividend increase is that a buy back “returns” money to the shareholder (if the stock price rises commensurately) in the form of unrealized gains – thus no taxes are due until shares are sold. A stock buy back also indicated corporate confidence, which tends to bolster the stock price on top of the reduction in the number of shares.

        The basic operation of the stock market is not all that complicated. A financial class covering stocks and bonds and loans/mortgages and credit cards should be part of the core high school curriculum in our public schools.

    2. When a company issues stock, it takes in cash and dilutes the ownership by adding public shares. A share buyback is just the opposite – taking cash from the company to pull shares back out of the public pool.

      The result is that each owner will have a slightly larger share of the company. Also, it improves any “per-share” ratio such as earnings-per-share since there are less shares to divide among.

  1. It’s unlikely stock buybacks will increase Apple’s share price when the greediest of Wall Street investors are only interested in a company’s growth potential. Apple really needs to focus on growing its revenue and maybe the quickest way of doing that is to acquire some company with good growth potential. Apple remains The iPhone Company and just the slightest mention of lowered iPhone sales sends the company stock reeling.

    Stock buybacks are nice when it comes to being able to increase dividends but I sure don’t see it increasing Apple’s share price to any significant degree. Wall Street is always saying how Apple is cheating/fooling investors by buying back shares because no one at the company knows how to boost revenue growth. The usual claim is that Apple’s buying back of shares is only a weak substitute for actual growth. One look at Apple’s P/E compared to any FANG stock or Microsoft P/E will show that inherent weakness.

  2. Never will happen.

    Look at what has been happening. Apple has been buying shares back for year.

    Then splits 7 for one. Makes all that buying back of stocks meaningless. Number of shares went up, not down.

    You watch Apple will buy shares back for a few more years, stock price will go up, then a split and we’re back to where we are now.

    1. Think about what you are saying.

      The total number of a company’s shares is always 100%. It does not matter if ownership shares are large (like a big brownie) or small (like 2 small brownies). If you own shares before a split, you own the same proportion of shares after the split, although the actual count number of shares you own changes according to the terms of the stock split.

      The shares purchased by the company are held in reserve. (They can be used for things like stock grants to executives.) Obviously, the reserve shares do not accrue dividends. By purchasing shares on the open market, it is possible for a company to reduce its future dividend payouts. The (future) financial impact to the company is a function of what happens to the dividend payouts. If dividends are expected to increase, and if the shares can be purchased at prices deemed “reasonable”, then the share buy-back could make a lot of financial sense to the company.

      1. You’re an idiot. Let’s do simple math. I have more shares of Apple NOW then I ever did. While splits have no effect on your net worth, they do have an effect on the number of shares.

        I have 7 times the amount of shares I had previously. So yes, the split DID have an effect on shareholders. Or are you just stupid.

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