Apple is all about the buybacks, Nemanja Vujcic writes for Seeking Alpha:
For the past seven years, Apple has relentlessly pursued a highly aggressive buyback policy. Over 313 billion dollars have been spent over this period on buybacks. This is a factor which was completely absent in the high-growth years… Therefore, if growth in Apple’s revenue from the wearables and services categories was the catalyst for the stock’s bull ride, it is the expectation of future buybacks that makes the current price reasonable.
The total number of outstanding AAPL shares has decreased by almost a third, 32.8% to be more precise, since 2013. It is truly an outstanding achievement that Apple, despite all these buybacks and skyrocketing research expenses, continues to have an ever-growing amount of cash at its disposal…
When you read projected EPS for a company, those numbers assume that the number of outstanding shares in the future will remain the same as it is now. In the case of a company like Apple, which is obviously going to continue to pursue aggressive stock buyback programs, using EPS projections unadjusted for a reasonably expected lowered outstanding stock count results in a completely distorted picture of the stock’s true potential…
Neither the current, nor projected, revenue, and income growth of Apple justifies the premium valuation which the stock is currently enjoying.… The only reason why AAPL shares deserve their premium valuation is the logical expectation that the aggressive stock buyback program will continue.
MacDailyNews Take: Vujcic’s analysis – that Apple is all about the buybacks – is fatally flawed, as it totally ignores the potential for Apple to introduce new products. Apple is not a stagnant enterprise.
Try reading the article MDN: “Neither the current, nor projected, revenue, and income growth of Apple justifies the premium valuation which the stock is currently enjoying.… The only reason why AAPL shares deserve their premium valuation is the logical expectation that the aggressive stock buyback program will continue.”
MDN obviously read the article and responded correctly:
Vujcic’s analysis… totally ignores the potential for Apple to introduce new products. Apple is not a stagnant enterprise.
MDN and you are completely incorrect. Apple Watch is a new product. So are AirPods. Despite these successes, the fact remains: ONLY the share buy backs are driving share prices higher. The new products are doing NOTHING.
Deal with that fact.
If Apple stopped buying shares, the stock would collapse like a house of cards.
Apple’s only value to the market is share buybacks.
There is significant validity to Ron Hubbard’s statement(s) which probably can be applied to many other of the major stocks on the market today. Buyback policy temporarily increase the demand for a stock, inflating it’s price and setting up the fall in price once the demand declines. It would not surprise me to see sales of their stock by CEOs and others in the know prior to the cessation of their buyback policy. That’s what I’d do.
A lot of very astute econ thinkers, with deep market knowledge, are very concerned about the place buybacks hold in the macro and micro markets.
It’s all about valuation and AAPL’s rise–since fall ’19, to pre-virus–was very inflated and buybacks played a significant part in disguising the value discrepency (non-equivalent earnings). It’s also of significant concern that companies, including AAPL are funding the buybacks with leveraged money that, on the surface looks cheap b/c of low interest rates, but with the bond market going sideways, it adds a very complicated piece to the “cheap money.”
I think the buybacks need to stop and laser focus on the “simple” balance sheet is needed. This is now a glaring need with the huge bump brought on with corona-v.
Very well said. Put all those shares that Apple bought back on the market and watch the stock price drop $150 or more. It’s all a mirage. Apple has produced no value for its shareholders other than by incinerating their own money.
Because Apple does not need those bloodsuckers. They know who they are: daytraders and speculators, the scourge of Wall St. that hang around, hang around like denizens of the cesspool, anti-Adam Smith Capitalists using perverted Socialist practices to manipulate profit like a monetary rapist. I am not talking about a long term investor who cherishes 🍎 Corp. for the delight and its community values and optimism that it brings to folks and groups and then cashes out at some point.