Apple: Time for the cash flood

“When Apple reports FQ2 results for the period ending March on May 1, the tech giant is set to outline the capital allocation plans after tax repatriation,” Stone Fox Capital writes for Seeking Alpha. “The cash flood could be the catalyst for the stock soaring to $200 and becoming the first stock to top the $1 trillion mark in market cap.”

“Back on April 5, Citi reiterated a $200 price target on the stock due in part to expected massive capital returns,” SFC writes. “The stock has about 16% upside to reach this price target. Such a gain would send Apple’s market cap up toward just shy of $1 trillion depending on the level of stock buybacks. The downside of reducing the share count is a lowered market cap.”

“The CFO [Luca Maestri] suggested on the FQ1 earnings call that the company would move more toward a net cash neutral position over time. What exactly this means is entirely unclear. What’s known is that the current cash balance amounts to 19% of the $860 billion market cap,” SFC writes. “Apple is set to at least double the share buyback plan while making the traditional 10% hike to the dividend. With more than $30 per share in net cash, the stock is extremely cheap, trading at 10x FY20 EPS estimates. This valuation remains supportive of the company ramping up stock buybacks which will further boost forward EPS estimates and make the stock even cheaper. The big cash flood should boost the stock to new heights including reaching $200 and approaching the $1 trillion market cap.”

Read more in the full article here.

MacDailyNews Take: We’ll see if the share count reduction impinges the market cap, but as long as the share price increases, who cares?! A trillion-dollar market value will come eventually. Apple is too big a cash machine for it not to happen.

6 Comments

  1. Most of Wall Street is betting on Amazon passing Apple and reaching that $1T market cap long before Apple does. It seems quite likely to happen that way. The wealthy Amazon investors and largest hedge funds will keep pouring money into Amazon and continue hoping Jeff Bezos is aggressive enough to put every other retailer out of business. Once that happens, Amazon will have no competition and then Jeff Bezos will basically own the U.S.

    Apple is throwing away most of its chances by not doing any major acquisitions and spending most of its cash on stock buybacks. Apple is one of the few major tech companies who are said to have almost no growth potential. Amazon keeps widening its revenue base while Apple seems to be doing almost nothing. As long as Apple continues to mainly depend upon the iPhone in a saturated smartphone market, the big investors will continue to ignore Apple and put their money elsewhere.

    All Apple will get with stock buybacks is a lowered market cap while Amazon zips right on past with a likely P/E of around 450. Apple is forever stuck with a P/E of 17 – 18 which is far lower than any major tech stock in the market. Wall Street has given up on Apple as big investors have no confidence in Mr. Nice Guy, Tim Cook. I’m a long-term Apple shareholder and all I can hope for is increased dividends and little else. If Apple stock is so cheap, one would think there would be more buyers. Nope, not happening. They’d rather pay $1500 a pop for dirt cheap Amazon shares.

    1. I’d rather invest in a Company that makes a real profit. Amazon is way too volatile, particularly given this current Presidential Administration. Cheetolini could nuke Amazon any day on a whim. Many people are saying that.

  2. Doug,Amazon is so over priced its crazy. If anything goes wrong with the company ever, the value of a share is going to drop form 1500 a share to 200 a share. Can anyone afford that???? Amazon is still all hype.
    Explain Amazon with a P/E of 500 and an Apple P/E of 17.???

    Really.

    1. amazon is a wonderful delivery service with razor thin margins riding the nations economic expansion, any pullback will cause amazon to go negative overnight

  3. great investment thesis – rush to buy stock just because you may get some of it back soon to then deploy in actual investment ideas. brilliant. or you could just not buy the stock, keep all of your investment in your pocket for actual investment ideas. tell me you understand that the value of a company (and the per-share equivalent) will decline dollar-for-dollar any time capital leaks out via share buybacks etc

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