RBC believes Apple Inc. could double $60B share buyback, ups price target to $525
With billionaire investor Carl Icahn pushing for Apple to initiate a larger share buyback, RBC Capital Markets believes the iPhone maker could nearly double its current $60 billion in planned expenditures while maintaining a manageable level of debt in order to boost its share price.
Analyst Amit Daryanani sees such a move adding about $4 to Apple's fiscal year 2014 earnings per share, an increase of about 10 percent. Most large cap companies have a debt to earnings before interest, taxes, depreciation and amoritization ratio of about 2x, while Apple is currently at 0.3x.
If Apple were to accrue more debt and nearly double the size of their planned buyback to about $115 billion, the company could still have a debt-to-EBITDA ratio of 1.3x, Daryanani said. That would keep it well below other large cap companies and in line with fellow tech company IBM.
He sees a major increase to Apple's stock buyback program potentially boosting the value of AAPL shares by as much as $90.
Apple plans to spend $60 billion through 2015 to repurchase shares. With its stock off more than $250 from its all-time high, Apple opted to accelerate its schedule and spend $16 billion last quarter to buy back 36 million shares.
Apple still has more than $40 billion to buy back shares over the next two years, but Icahn believes the company should accelerate those plans, and encouraged Chief Executive Tim Cook to do so in a conversation earlier this week. The investor also revealed that he has a "large position" in the company worth about $1.5 billion, a revelation that helped to push AAPL shares past $500 on Wednesday for the first time since January 23.
Regardless of whether or not Apple does boost its buyback program, Daryanani said investors will remain focused on the company's new iPhones, which are expected to be introduced at a media event on Sept. 10. He has upped his price target for AAPL from $475 to $525, with an "upside scenario" of $600.
Analyst Amit Daryanani sees such a move adding about $4 to Apple's fiscal year 2014 earnings per share, an increase of about 10 percent. Most large cap companies have a debt to earnings before interest, taxes, depreciation and amoritization ratio of about 2x, while Apple is currently at 0.3x.
If Apple were to accrue more debt and nearly double the size of their planned buyback to about $115 billion, the company could still have a debt-to-EBITDA ratio of 1.3x, Daryanani said. That would keep it well below other large cap companies and in line with fellow tech company IBM.
He sees a major increase to Apple's stock buyback program potentially boosting the value of AAPL shares by as much as $90.
RBC Capital Markets believes Apple could afford to take on more debt in order to boost its stock price.
Apple plans to spend $60 billion through 2015 to repurchase shares. With its stock off more than $250 from its all-time high, Apple opted to accelerate its schedule and spend $16 billion last quarter to buy back 36 million shares.
Apple still has more than $40 billion to buy back shares over the next two years, but Icahn believes the company should accelerate those plans, and encouraged Chief Executive Tim Cook to do so in a conversation earlier this week. The investor also revealed that he has a "large position" in the company worth about $1.5 billion, a revelation that helped to push AAPL shares past $500 on Wednesday for the first time since January 23.
Regardless of whether or not Apple does boost its buyback program, Daryanani said investors will remain focused on the company's new iPhones, which are expected to be introduced at a media event on Sept. 10. He has upped his price target for AAPL from $475 to $525, with an "upside scenario" of $600.
Comments
OK. Let's do a little math.
Current share price is around $500. Daryanani thinks that an increased buyback would add $90 per share to the value. But that increased buyback is twice what has been approved, so let's only use the currently approved buyback which would therefore add $45 to the share value.
And his price target is $525? Sounds like a pretty pessimistic viewpoint.
Taking on more debt to increase the stock price is a losing move for Apple. Wall Street would make billions then turn against Apple using unrevealed Asian sources who rumor any kind of problem to knock the stock price down while earning more billions betting against the company.
We have already witnessed one of the largest financial decimations occur over the last year as Wall Street pumped Apple above $700 per share then brought the company down to $400 just on rumors that have yet to pan out. Not one analyst has or will apologize for their actions because of greed, greed and more greed.
Apple has a ton of money and Wall Street and the US government want it. The future of the company be damned as long as they can squeeze every penny they can from Apple today!
This is too much. I was in favor of Apple initiating a dividend and some buyback when it wasnt doing any of those and Apple did it. Now we have leeches that want to suck the life out of Apple to make a quick buck.
What is really needed is the US gouv to address the insane corporate tax rates. If Apple could bring back its cash in the US it would not have to borrow any money. I dont mind the cash going down to around 100 billions, but I would not pay more and keep that cash in reserved.
The US needs to lower tax rates of offshore money into single digits and lower domestic tax rate below 20%. For example, Canada as a corporate tax rate of 15% compare to 35% in the US.
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Originally Posted by Mooch
I don't really understand why everyone wants Apple to blow all their money buying back shares instead of developing new products with it.
They could buyout Microsoft and close their doors. /s
Quote:
Originally Posted by herbapou
This is too much. I was in favor of Apple initiating a dividend and some buyback when it wasnt doing any of those and Apple did it. Now we have leeches that want to suck the life out of Apple to make a quick buck.
What is really needed is the US gouv to address the insane corporate tax rates. If Apple could bring back its cash in the US it would not have to borrow any money. I dont mind the cash going down to around 100 billions, but I would not pay more and keep that cash in reserved.
The US needs to lower tax rates of offshore money into single digits and lower domestic tax rate below 20%. For example, Canada as a corporate tax rate of 15% compare to 35% in the US.
Oh, sure, lower the corporate tax rate and increase the personal tax rate... just like Canada.
Quote:
Originally Posted by Mooch
I don't really understand why everyone wants Apple to blow all their money buying back shares instead of developing new products with it.
They can buy a helluva lot more shares before it starts hurting Apple's R&D budget.
A stock repurchase might stew volatility. Less stocks for speculators
A day late and a dollar short.
I am amazed that these guys continue to hold jobs (leave alone continuing to get their names in the press).
Quote:
Originally Posted by herbapou
This is too much. I was in favor of Apple initiating a dividend and some buyback when it wasnt doing any of those and Apple did it. Now we have leeches that want to suck the life out of Apple to make a quick buck.
This is exactly what will happen when your investor 'clientele' switches from a 'growth' to 'value' investor base. They're like a bunch of needy, greedy babies -- more cash payouts please, more cash payout please, more cash payouts please..... They'll never stop.
Some of us predicted this when Apple reinitiated dividends.
And the fingerprint scanner faces production difficulty which lower the iPhone sales estimate .
And fewer than expected of people lining outside Apple store on the iPhone launch date means the iPhone demand is weaker than expected . Sales disappointed as Apple only sells 10 million iPhone 5s in 3 days when the market expects Apple can sell 15 million iPhone .
What else ? Parts order reduced coming up ……
Quote:
Originally Posted by island hermit
Oh, sure, lower the corporate tax rate and increase the personal tax rate... just like Canada.
We still have a better quality of life, full health-care included in those taxes, and we have good paying jobs available because the corporations like the low corporate tax rate. I'll take that option everyday.
I recommend shutting down the IRS, eliminating the income tax and enacting the Fair Tax (Google it). Also, to save money that is just wasted right now, shut down our many military bases from South Korea, to Germany, to any number of countries not needing American military occupation.
Buy some really great innovative companies! Dominate the entertainment business world!
Quote:
Originally Posted by AppleInsider
With billionaire investor Carl Icahn pushing for Apple to initiate a larger share buyback, RBC Capital Markets believes the iPhone maker could nearly double its current $60 billion in planned expenditures while maintaining a manageable level of debt in order to boost its share price.
So Apple goes from debt free with billions in cash to debtor with substantially less cash just to line the pockets of billionaires? How is this good for the company? What does this leave for R&D, which has been a kind of sore spot for me?
Originally Posted by SpamSandwich
…(Google it)…
Blasphemy.
…shut down our many military bases from South Korea… …not needing American military occupation.
I like how subtle this is.
Quote:
Originally Posted by island hermit
Oh, sure, lower the corporate tax rate and increase the personal tax rate... just like Canada.
We have bigger personnal tax rates because it includes health insurance, not because of corporate taxes...
BTW it looks like China mobile will sell the new iphones... I think this just brought support for the $500 stock price, that is if the entire market doesnt crash, like its doing right now.