Due to the COVID-19 outbreak, many companies are suspending their plans for buybacks, but Apple is expected to remain aggressive. Two analysts on Wednesday said the Cupertino Colossus is likely to add up to $100 billion to its buyback plan next week.
Apple has about $100 billion in net cash and the company has set out to become net-cash neutral “over time.”
The company “will likely announce an authorization for $75 billion to $100 billion in buybacks” and a 4% to 7% dividend increase, Evercore ISI analyst Amit Daryanani wrote in a note to clients… He expects the company will keep its skew toward buybacks given that its large market value makes it difficult for Apple to offer an overly attractive yield.
Bernstein’s Toni Sacconaghi took a similar view as he also told clients to expect a boost of $75 billion to $100 billion in Apple’s buyback authorization when the company posts results next Thursday. Sacconaghi estimates that the company “could probably extend its program by an additional ~3 years if it takes on net debt, i.e. $100 billion, levering up to ~1.3x net debt to Ebitda.” He argued that the company seems able to generate 5% to 6% growth in earnings per share “from buybacks alone” for the next four to seven years.
MacDailyNews Take: It’s simple enough: Buy low at these depressed prices. Apple can then retire the shares while using some to attract/retain talent, as usual. EPS keeps growing as buybacks continue for years.
Hoping Apple will not buyback shares, but they will utter waste…
They won’t. Apple’s executive team isn’t that short-sighted. In tragedy lies opportunity. If they hold onto their cash hoard and keep their powder dry, there will be amazing M&A targets to be had in a year or two. Not companies like Netflix and Zoom that thrive in a work-at-home environment but those that are crushed by this Think retail POS, hospitality, airlines, sports, live music, and so on. Then think about their suppliers, who will also be available for pennies.
Not that any one of those in particular is an obvious match with Apple, but the point is that there will be a zillion companies available. Some won’t be obvious at a glance. Maybe a lithium mining operation to bolster their battery supply chain. Maybe a provider of in-flight entertainment.
I like stock buybacks, but I don’t like the “net neutral” idea. I’d like to see them hold ~$200B in cash for rainy days.