Just because the stock didn't rocket higher today doesn't mean the buyback is meaningless. This buyback will decrease the outstanding shares by roughly 15% over 3 years based on todays price. That in essence will INCREASE the pershare earnings for each Q going forward by approximately .50 per share. That theoretically should increase the share price even if Apple earnings flatten out. What it doesn't do is change the fact that Apple earnings will most likely not increase YOY in the comming Q or in the Q after that. What it does do is mitigate the damage this fiscal year while augmenting better earnings next year.
You people should stop worrying about "the next quarter", and try to look a little farther down the road. Apple buying it's own stock at these depressed prices is a good thing to do. As Buffett said this morning, "if you can buy a dollar for 80 cents, it's a good deal". A couple of years from now, you'll be glad you actually saw the wisdom to INVEST, and put aside all of this silly options #$%$, which is just playing with pennies, and putting commission into the pockets of the brokers. Take some hard-earned cash and invest in the future for a change.
Docproc, 1) Can you tell me if you know whether buy back has already started (ie. today) or when it will start?
2) Is there a way to monitor the daily buy back volume to determine if the B/B is supporting the stock or whether the stock is standing on it's own? Thanks
The buyback will take place in stages over many many months, each purchase is not specifically announced ahead of time. Keep in mind that AAPL trades an average of 19+ million shares daily - which is over $8 Billion per day. The entirety of AAPL's buy-back will only cover an average of 8 to 10 days of trading over many many months. It is impossible for the buyback to artificially prop-up the share price over this time period. The stock always "stands on its own"...
Doc, theoretically it doesn't increase the share price because some cash goes away which offsets the better EPS. Moreover, the share price is an arbitrary multiple of EPS based on FUTURE GROWTH expectations. Summed-up, if investors decide to ignore the lost cash and keep the P/E ratio exactly the same as it is today then your theory holds......Investors will do neither. They won't ignore the lost cash and they have no reason to keep P/E ratio the same as it is today. It all comes down to growth. With growth, the buy-back is brilliant and accelerates the upward movement of the share price. Without growth, the buy-back doesn't help.
What everyone is forgetting is that this is essentially capital restructuring. AAPL is giving money back to shareholders simply because it CAN. It can buyback and maintain growth. Want to know how it can still afford to grow? Something called a AA+ credit rating and low interest rates. By trading equity for debt the company gets the benefit of a tax shield as well. Do you actually believe they need all $60B to develop new products? Only a fraction of that. Everyone knew the time was coming for AAPL to pay out since it would be reckless to do otherwise. AAPL is a special case in which its buyback is not a signal of low growth prospects, but instead represents a switch to more efficient capital management and strong BS/confidence in the ability to acquire debt financing on a moments notice. If the market does not realize this now, it will in time.
Growth is a non-issue, a $380B co can easily find more ways to grow, the hard part is growing margins. Even if that were the case, AAPL would still be worth substantial $. Think of all the cos with tons of revenue and terrible margins. AMZN, NFLX? Trading at apparently crazy valuations, but not really, since they show potential nonetheless.
buyback increase future EPS which will push up share price, all else equal. If growth is flat and they do a buy back EPS will still increase so it should increase share price....unless you use some other valuation technique than PE.
Stock buy-backs simply retire cash and stock into nothingness. This is very effective in moving share price up IF AND ONLY IF growth is also part of the equation. If revenues/profits/marketshare are SHRINKING, then a buy-back is a diversion at best....at worst it accelerates the fall because the company ends-up paying too much for the shares (outside investors may feel its the best time to cash-in).
But AAPL issues stock optios for Tim Cook and high ranked AAPL officers about the same amount of shares. So it has 0% impack on share price.
In the past, AAPL was growing so people don't care. Now they need to keep the outstanding shares about the same.
Seems like it adds a "buyer" to the equation. If this "buyer" actually starts buying then there are always more buyers than sellers. Shouldn't that cause stock price appreciation for the "investors" that want to hold on for a gain in their "investment" in AAPL? Just thinking out loud here and I've been pummeled by AAPL investments.
The problem is that it also reduces cash (by increasing short-term debt), which is part of the current valuation equation. It really is a zero-sum. It is only beneficial IF strong growth occurs simultaneously....then the buy-back becomes brilliant and will help propel the price upward. However, without growth, the buy-back doesn't really help.
The increase EPS alone should increase share price. However, share repurchase will not help increase revenue. It will also reduce the cash balance or decrease the strength of the balance sheet which is one of the major factors supporting share price.
I contend that the cash was doing NOTHING for the share price because it was mostly overseas and Apple has been stingy with it. This move will force the street to deal with it and really factor it in thier calculations of earnings going forward.
If Apple fails to get back on the growth track it won't make that much difference but I think this year will only setup at least 3 more years of earnings growth.