Apple: Still cheap at $1 trillion

“Now that Apple has crossed the $1 trillion market cap threshold, the capital returns need to be reviewed again to derive whether value still exists in the stock,” Stone Fox Capital writes for Seeking Alpha. “The famous plan for a $100 billion boost to stock buybacks was impressive at much lower values. My investment thesis that the stock wasn’t still priced for the EPS boost still stands.”

“Prior to tax reform that allowed for foreign repatriation of cash, the net payout yield had slipped to the 4% level,” SFC writes. “With tax reform, the yield that combines the dividend yield and net stock buyback yield has recovered to over 7%.”

“The dividend hike places the yield at 1.4% placing the vast majority of the capital returns on the stock buybacks. Considering Apple ramped up capital returns with FQ2, a full year of this pace of over $25 billion per quarter places the annual spend near $100 billion,” SFC writes. “At the $100 billion rate, Apple has a net payout yield of nearly 10% with a market cap of $1 trillion. A yield at that level approaches the top 10 in the large cap sector, an impressive feat for a market cap of a trillion. A company with that large of a net payout yield is signaling that the stock is cheap and the value exits in comparison to the assets of the company.”

Read more in the full article here.

MacDailyNews Take: Yup. Apple remains notably undervalued.


  1. Well, if Apple is cheap then Amazon must be nearly 10X cheaper. Big investors are happily buying Amazon stock at a faster rate than they’re buying Apple stock. If big investors are happy to pay nearly 10X more than Apple, then Amazon must be the greatest bargain stock in the world. Amazon is easily on track to surpass Apple in total value by the end of September. Jeff Bezos can do no wrong. Apple could easily have been the wealthiest company by far but now it will only be the second wealthiest company in about a month’s time.

    Even with all of Apple’s stock buybacks, Amazon’s EPS quickly surpassed Apple’s EPS. Although Apple’s P/E is relatively low, it really doesn’t matter because Amazon will still be more valuable than Apple as big investors believe Amazon is worth more than Apple by a substantial amount.

    Saying Apple remains notably undervalued is quite useless as it will continue to stay that way in the future, so there’s no point in mentioning it. Apple will never have a P/E close to what the FANG stocks have.

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