The Street is underestimating the timing and impact of Apple going net cash neutral

“Tim Cook said on the Mar-18 earnings call that Apple will be net cash neutral ‘over time,’ but stopped short of specifying a timeline. Over the next 12 quarters, we expect Apple to return $300B to shareholders and to be net cash neutral by the end of the Mar-21 quarter,” Gene Munster writes for Loup Ventures. “This would more than double the current pace of capital returns. ”

“Apple has distributed $234B over the previous 6 years,” Munster writes. “We believe the buyback alone could move shares of AAPL higher by 24% over the next 3 years.”

“After a 3-year period, capital distribution levels will normalize, going from about $100B a year to about $50B+. We anticipate Apple to maintain it’s net cash neutral approach into perpetuity. To do this, the company will need to return $50B+ each year, with 85% coming in the form of buybacks,” Munster writes. “This would still leave the company with about $6B in additional cash per quarter to invest…”

Read more in the full article here.

MacDailyNews Take: Wall Street underestimating Apple? Say it ain’t so.

5 Comments

  1. I have a feeling that Steve Jobs wouldn’t have agreed with this approach. He did tell Tim Cook not to follow what he thought Steve would do.

    I freely confess that I am not a business mastermind. I will say that I think eliminating any cushion for hard times and funds for strategic, timely purchases seems unwise to me. Why completely cash neutral? Why not a smaller pot of cash that could still buffer market stress and be used to gain key IP or capabilities?

    1. In other words, I think operational imperatives and goals outweigh stock valuation goals, or even shareholder interest in dividends (though laudable). The surviving and thriving of the company itself, with the main goals of excellence in products (including world and paradigm changing products) and delivery, is essential. Without those, the stock will fall. I know that a CEO is often paid in part for the upward valuation of their stock in the short term. The long game is how we should focus our CEOs.

  2. It’s amusing (and somewhat disappointing) how Apple is spending all that cash to move the share price a mere ten dollars higher in an entire year. Meanwhile, Facebook can create some cheap app and move the stock price $50 in a few months. Facebook will reach $250 before Apple gets to $200 a share. That’s rather sad. Facebook can monetize everything it does and investors are practically throwing money at Zuckerberg. Of course, Zuckerberg has already proved he’s a god CEO by outsmarting Capitol Hill and the EU in record time. Facebook is untouchable by any regulating faction and will definitely continue to outperform Apple in terms of share gains. I don’t even understand Facebook’s high value because I never use social apps.

    I think of Apple spending a $100B for stock buybacks and yet they can’t even update their desktops to match Windows PCs in performance. Forget about the Mac Mini. The only thing we’ll ever see of it is those refurbished ones on Apple’s web site and those are all dual-core processors for crissakes. I’m glad I still have my quad-core i7 Mac Mini. Why is Apple so damn cheap when it comes to desktop performance for the buck?

Add Your Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.