Apple has made huge progress toward its ‘net cash neutral’ goal

“In early 2018, just a couple months after tax reform was passed, Apple CFO Luca Maestri outlined a new goal that the company would be pursuing over time: getting Apple’s capital structure to ‘net cash neutral,'” Evan Niu writes for The Motley Fool. “That target entails reducing the company’s net cash, which includes its total cash as well as total debt, down to $0. Apple had finished 2017 with $162.7 billion in net cash when including commercial paper, a form of short-term debt that companies often use for working capital purposes.”

“In the quarters since, the Cupertino tech giant has slowly been chipping away at its net cash position, returning capital to shareholders through dividends and share buybacks,” Niu writes. “Apple just made a big dent in its net cash position… Apple’s net cash position [is] $112.8 billion, down from $130.3 billion at the end of the fourth quarter.”

U.S. “tax reform has given Apple significantly more flexibility in managing its global cash hoard, as it can now freely repatriate cash after paying deemed repatriation taxes of $38 billion,” Niu writes. “It’s quite likely that Apple will be able to get its net cash position below $100 billion within the next quarter or two.”

Read more in the full article here.

MacDailyNews Take: Why does Apple want to get to “net cash neutral” eventually?

As Gene Munster explained last summer:

Getting to net cash neutral is one of Apple’s biggest levers to move shares higher… The mechanics are simple. Buybacks lower share count and raise EPS, which should theoretically move shares of AAPL higher by 24% over the next 3 years… We anticipate Apple to maintain its 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. This would still leave the company with about $6B in additional cash per quarter to invest.

Major Apple acquisition looms; ‘people will be shocked’ – April 4, 2019
Apple’s $130-billon problem: Zero-cash goal could be a cause for concern in a few years – March 8, 2019
Apple cash neutral: Smart capital allocation or corporate gimmick? – March 14, 2018
What ‘cash neutral’ means to Apple shareholders – February 22, 2018
UBS: How Apple could get to zero net cash – February 14, 2018


  1. It’s nice to hear about those biggest levers, but… meanwhile Apple stock is on its way to another round of value losses, now falling well behind both Microsoft and Amazon in market cap. For such a strong company as Apple is claimed to be it sure suffers from a lot of weakness when it comes to holding its value. Apparently, Apple needs to use some financial chicanery to gain in value whereas Amazon and Microsoft don’t.

    As I’ve said before, I am holding Apple for the dividends and don’t expect much more than that. I’ve heard Munster talking about Apple rising 70% in value over the next couple of years, but Apple certainly doesn’t look capable of such a rise, especially if these Chinese tariff problems aren’t settled quickly. To me, it still makes more sense if Apple used that reserve cash to increase its revenue stream rather than just buy back stock. But then again, what do I know as I’m no financial wizard. If Buffett thinks buybacks are good for Apple then I suppose I can trust his judgment based on his long-term knowledge of the market.

    1. I think they are both returning cash to the shareholders and working on developing new revenue streams. It is an open question whether Apple (or any other company) is making good choices about how to spread their profits around.

      From time to time there are calls for Apple to make a big purchase (Disney, Netflix, …) with their cash. This always sounds tempting, but these large acquisitions very often fail. It takes a huge effort to manage an acquisition and the main products can suffer from inattention.

      Apple has been growing their R&D budget strongly over the last decade or so. It is now something like $14B a year. Tim Cook at the last shareholders meeting made a point of saying that Apple is investing in a number of new ideas, not all of which will pan out. This is great. No one has a crystal ball, we want Apple to take chances on many things so that the do wind up with a few successes. The difference with Apple is that they don’t talk about things they are taking a chance on.

      Certainly they worked on OLED, Face ID, Touch ID and others for years before we heard of them.

      We do know that health care is an area that Apple is very interested in (announced at shareholders meeting and elsewhere). This could include various sensors attached to the Apple Watch or iPhone as well as secure ways to keep and manage your medical records. Probably more things as well.

  2. Can someone explain what happens when the stock market crashes. For example, if Apple’s stock is at $200, and it’s value drops to $100 when the entire market crashes (like in the 2008 crash), how does Apple “win” in such a scenario? Do all these “stock buybacks” pay off in such a scenario? Just asking.

  3. This is why apple is in trouble. Idiots like this. Cash neutral? What if you want to buy a company, the economy takes a big turn down and you have no money to weather the storm. Seems like the liberals at apple don’t understand basic business and finances.

    1. The point is how much cash does Apple need to have on hand. Certainly not 150BB.
      Apple does have responsibilities to its shareholders to make good use of their capital. Apple have decided that the best option is to return the cash as buybacks because they feel the stock is undervalued.

      1. I could understand that if Apple didn’t seem to be scrimping and scraping and in some areas under investing in many areas and cerainly playing safe so often while waiting for others to take the risks beore they stick their toes in and thereafter pay out fortunes playing catch up Netflix and Spotify and Seri amongst others that come to mind. If this is how they operate with $130 odd billion in the bank then I do worry about confdence in their tactics when they are cash neutral and expecially if problems in or around them develop as can always happen when being dynamic of conservative. Some of us remember the days when they had to do deals with Microsoft to eventually flourish and did marketing trickery around the first IMac to stay in the game. Don’t see that sort of thing working with Cookie at the helm rather than a once in a lifetime genius.

    2. You could ask the same thing about “I’ll release my tax returns” Trump. If he’s the self-funding billionaire he claims to be, why did he have to go to DeutschBank repeatedly for loans? Oh yeah. Semi-legal money laundering.

  4. At the suggested rate of $50B in buybacks per year, Apple could take itself private in twenty years without any additional influx of capital. That’s kind of incredible for a $1T company.

  5. New Jersey & Mass already had laws preventing those states from going cashless . NY has a bill to do the same. If cashless was working why is Amazon now adding cash to their cashless stores ? Last week I was in Starbucks and the barristers freaked out . people are using cash and they didn’t have money for change .Theres a backlash against going cashless and its just starting

    1. … are using those terms correctly.
      “Cashless” means one thing for an “Apple”, another for a “New Jersey”, and yet another for a “cashier”(barista). Apple going “cashless” does not mean you won’t be able to buy a case for your iPhone at an Apple Store using cash. Also, New Jersey won’t be trying to buy Delaware any time soon.

Reader Feedback

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