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Preferred stock seen as Apple's chance to 'seize the opportunity' and reverse losses

post #1 of 64
Thread Starter 
Apple now has a chance to reverse recent losses and boost its share price by providing even more of its cash reserves to investors, one analyst believes.

Brian White of Topeka Capital Markets said on Thursday he believes it's "time for Apple to seize the opportunity" and initiate a much more significant return of cash to investors. He agrees with hedge fund manager David Einhorn of Greenlight Capital, who is suing Apple in an attempt to have the company distribute preferred stock to shareholders.

Cash
Apple added $38 billion in cash in fiscal 2011, but $16 billion in just the last quarter. Chart by Asymco.


White doesn't believe Einhorn is "married to the idea" of perpetual preferred stock. Instead, it's just a way to get Apple to share more of its cash reserves with shareholders.

At the end of the holiday quarter, Apple had $137.1 billion in net cash, amounting to $144.75 per share. Of that money, $94 billion is held overseas.

By the end of Apple's fiscal year 2015, White projects that Apple will have nearly $241 billion in cash. With the company's cash hoard continuing to grow, he believes "change is in the air," and the company will eventually pay out more cash to shareholders.

In particular, he noted that the 36 percent decline in Apple's stock since late September represents a shift in the company's shareholder base. Like Einhorn, White believes a more significant return of cash will attract value-oriented investors.Brian White projects that Apple will have nearly $241 billion in cash by the end of fiscal 2015.

"Since over $94 billion of the net cash is outside of the U.S., we believe David Einhorn's perpetual stock makes sense," White said. "Also, Apple could tap into the debt market to increase its U.S. cash position, using the proceeds for an increased common stock dividend and an expanded stock repurchase program."

White believes Apple could increase its cash dividend payout from its current $3.75 to $5.00 per share on a quarterly basis. He also thinks the company has room to ramp up its stock repurchase program to as high as $100 billion in a 5-year initiative.

Topeka Capital Markets has maintained its price target of $888 for AAPL stock ? a number nearly twice that of its current trading price.
post #2 of 64
The last thing Apple needs to do is please vulture investors. Apple might as well do a Dell, and become a private company and keep the greedy investors away.

One has to remember, investors want make their money the old-fashioned way -- rape and pillage.
post #3 of 64
I don't have Apple shares, but as far as I'm concerned please let Apple pile up the cash. Can't wait to hear about the iWall, iGlass, iCar, iRoad, iCity, iSpacepod or whatever incredible consumer friendly but gigaexpensive R&D surprises might come. We may actually live to see the start of cleaning up the oceans...
post #4 of 64
Isn't the current dividend $2.65 per share per quarter rather than the $3.75 mentioned in the article? Or has that recently increased?
post #5 of 64

I'm sick of these rich and greedy Wall Street self-entitled types. It's a whole other level of trolldom.

post #6 of 64
Quote:
Originally Posted by AppleInsider View Post

Apple now has a chance to reverse recent losses and boost its share price by providing even more of its cash reserves to investors, one analyst believes.

Brian White of Topeka Capital Markets said on Thursday he believes it's "time for Apple to seize the opportunity" and initiate a much more significant return of cash to investors. He agrees with hedge fund manager David Einhorn of Greenlight Capital, who is suing Apple in an attempt to have the company distribute preferred stock to shareholders.

Cash
Apple added $38 billion in cash in fiscal 2011, but $16 billion in just the last quarter. Chart by Asymco.


White doesn't believe Einhorn is "married to the idea" of perpetual preferred stock. Instead, it's just a way to get Apple to share more of its cash reserves with shareholders.

At the end of the holiday quarter, Apple had $137.1 billion in net cash, amounting to $144.75 per share. Of that money, $94 billion is held overseas.

By the end of Apple's fiscal year 2015, White projects that Apple will have nearly $241 billion in cash. With the company's cash hoard continuing to grow, he believes "change is in the air," and the company will eventually pay out more cash to shareholders.

In particular, he noted that the 36 percent decline in Apple's stock since late September represents a shift in the company's shareholder base. Like Einhorn, White believes a more significant return of cash will attract value-oriented investors.Brian White projects that Apple will have nearly $241 billion in cash by the end of fiscal 2015.

"Since over $94 billion of the net cash is outside of the U.S., we believe David Einhorn's perpetual stock makes sense," White said. "Also, Apple could tap into the debt market to increase its U.S. cash position, using the proceeds for an increased common stock dividend and an expanded stock repurchase program."

White believes Apple could increase its cash dividend payout from its current $3.75 to $5.00 per share on a quarterly basis. He also thinks the company has room to ramp up its stock repurchase program to as high as $100 billion in a 5-year initiative.

Topeka Capital Markets has maintained its price target of $888 for AAPL stock ? a number nearly twice that of its current trading price.

This is all stupid. Apple doesn't need two classes of stock - that's just a way to favor big shareholders over small ones. In fact, I would argue that Apple suffers partly because institutions control so much of their stock. They'd be better off by making it easier for small shareholders to own the stock - by splitting the stock.

Apple is better able to judge their cash needs than these funds. If Apple ever does reach the point where they feel that they need to distribute more, they can simply increase the dividend (either one time or regularly). Preferred stock is not the only way (or even the best way) to distribute money to shareholders.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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post #7 of 64
Current dividend is perfectly fine. Apple's stock only started going down AFTER they started paying out dividends. I think the current dividend payout is just perfect. The idiot who started the law suit should be left to waddle in his own incompetence.
post #8 of 64
Debt: the slippery road to being owned by Wall street
post #9 of 64

David Einhorn of Greenlight Capital could care less about apple's culture, apple's innovation, apple's exceptional leadership, apple's customers, or apple's common shareholders, or anything else other then how he can suck out the last dime of apple's cash.

 

Steve Jobs had the right idea when he wanted to keep his distance from Wall Street. Let's hope Tim Cook and the Apple board of directors have the same sort of backbone.

 

Patience will correct the presently low stock price, not David Einhorn.

 

 

post #10 of 64
Apple knows it needs all that money to survive the coming competition and margin compression
post #11 of 64
Quote:
Originally Posted by mvigod View Post

Apple knows it needs all that money to survive the coming competition and margin compression

 

Not sure if serious..

post #12 of 64

Apple owes Wall Street nothing. During the last few weeks they've been cashing in and turning their backs on Apple. Screw them.

 

Apple should spend their money on building a spaceship. Not a new HQ that looks like a space ship, I mean an actual spaceship. We've all seen 2001: A Space Odyssey. We're already 12 years behind...

post #13 of 64
Quote:
Originally Posted by jragosta View Post

This is all stupid. Apple doesn't need two classes of stock - that's just a way to favor big shareholders over small ones. In fact, I would argue that Apple suffers partly because institutions control so much of their stock. They'd be better off by making it easier for small shareholders to own the stock - by splitting the stock.

Apple is better able to judge their cash needs than these funds. If Apple ever does reach the point where they feel that they need to distribute more, they can simply increase the dividend (either one time or regularly). Preferred stock is not the only way (or even the best way) to distribute money to shareholders.

Speaking of stupid, did you really have to cite the whole article, graphics included?
post #14 of 64
It's time for Apple to wield the hammer. It increased its cash position $16 billion alone in the last quarter

Even if it increases cash only $20 billion/year over the next five years, it will have $240 billion total. A $100 billion stock buyback is completely doable - it would send a clear signal to Wall Street and it would significantly boost its EPS

If it continues to increase cash at $40 billion/year for the next five years, all best are off. It would have over $340 billion. Approaching its total market cap today

And yes, the current dividend is $2.65/share per quarter

Windows survivor - after a long, epic and painful struggle. Very long AAPL

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Windows survivor - after a long, epic and painful struggle. Very long AAPL

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post #15 of 64
I see it as an opportunity to for Einhorn to seize Apple cash for his rich customers from share holders such as myself.
post #16 of 64
Quote:
Originally Posted by mvigod View Post

Apple knows it needs all that money to survive the coming competition and margin compression

That's absurd.
post #17 of 64

David Einhorn of Greenlight Capital could care less about apple's culture, apple's innovation, apple's exceptional leadership, apple's customers, or apple's common shareholders, or anything else apple other then how he can suck out the last dime of apple's cash. Steve Jobs had the right idea when he kept his distance from Wall Street. Let's hope Apple's Board of Directors has the same kind of backbone.

post #18 of 64

You see it correctly!

post #19 of 64
Hogwash. The value of tech stock in particular has nothing to do with a company's performance or dividends. I'd go further to say the any publicly traded company is foolish to issue dividends since the market is dominated by day traders and hedge funds, so what's the point? Why should Apple give away money to people who otherwise dump their stock and therefore undermine the value when the company has record quarters? It's better saved to invest in other areas that directly benefit future success, and any investor who really trades on their success would agree.
post #20 of 64
Also, It would be nice if Apple insider reported another point of view other than vulture capitalists.
post #21 of 64
I think that Apple should increase their dividend a bit, say from $2.65 to around $4.00 per share. They could also increase their share buy back program by a couple of billion dollars a year. These moves would still leave Apple with northwards of $110 billion in liquid cash, which would continue to grow every year, just at a bit of a slower pace. With the share holders a little happier, then Apple can concentrate on what it does best...create products that wow consumers! TV's, Wearable Computers, Computerized Cars, Computerized Home Automation and...personal wellness systems that help consumers track their blood pressure, pulse, caloric intake, physical activity, etc... Soon Apple stock would be back to being incredibly sought after and drive the share price higher than Google and other tech companies.
post #22 of 64
Quote:
Originally Posted by wozwoz View Post

Current dividend is perfectly fine. Apple's stock only started going down AFTER they started paying out dividends. I think the current dividend payout is just perfect. The idiot who started the law suit should be left to waddle in his own incompetence.

Post hoc ergo propter hocApple announced the dividends in March 2012, paid the first one in July and, climbed to $700 in September, and crashed to $450 where it is now. And the dividend is responsible for the crash?

 

You cannot begin to understand the frustration of being an Apple shareholder. The company is being bashed on the daily basis, which I frankly question: “what’s wrong?” Yesterday there was a rumor of Foxconn hiring freeze, which was quickly translated to Apple cutting production for iPhone 5 due to slow demand. Even after it was clarified by another Foxconn PR person that it was due to better than expected employee retention rate, the stock still performed badly.

 

What’s more frustrating is Apple’s management denial that there is a problem with the shareprice. Time after time, Tim Cook said that he wants to focus on delivering great products; Wall Street will follow later. What he fails to recognize is Apple the brand is being tarnished, it’s being ridiculed as not cool enough, that users are abandoning it. Steve Jobs hated Wall Street and would have done the same, but he would have defended the brand to his last breath. Tim Cook and the Board of Director have so far come across as arrogant and oblivious to shareholder concerns. After all, they don’t own the business, the shareholders do.

 

If you own a business with a fortress-like balance sheet, large pile of cash, strong brand recognition, but you are refused a loan at the bank because concerns over growth or competitors eating up your lunch, how would you feel?

post #23 of 64

Watch men who create nothing froth at the mouth for Apple's worth and credibility.  Apple was originally run by a man who created things.  That is what creates true wealth and value.  You can engineer Apple's balance sheet to hell and back and it won't add one cent of fundamental value.  MBAs should be running pencil factories and selling breakfast cereal.  Apple's business model is anti-MBA and that has been the source of its value.  Watching Apple end that innovative run is a little sad.

post #24 of 64
I urge Apple management to pay attention to the mistakes of other firms in Silicon Valley, such as HPQ. Desperate acquisitions just to look good on paper have been shown to destroy share holder's value. The Einhorn move smells of desperation on his part. I prefer Apple use the extra funds to reduce the number of shares on the market. Reducing the float has worked well for companies like IBM. For the off shore funds, careful small acquisitions focusing on software would be advisable. Apple should acquire the companies and talent involving the start ups apps that we all tend to use frequently. Acquire Fantastical, Evernote, Addappt, Opera, and any other app company that succeeds in the market.
post #25 of 64
Quote:
Originally Posted by ankleskater View Post

Speaking of stupid, did you really have to cite the whole article, graphics included?
What’s more frustrating is Apple’s management denial that there is a problem with the shareprice. Time after time, Tim Cook said that he wants to focus on delivering great products; Wall Street will follow later. What he fails to recognize is Apple the brand is being tarnished, it’s being ridiculed as not cool enough, that users are abandoning it. Steve Jobs hated Wall Street and would have done the same, but he would have defended the brand to his last breath. Tim Cook and the Board of Director have so far come across as arrogant and oblivious to shareholder concerns. After all, they don’t own the business, the shareholders do.
[/quote]

None of that is true. Just to point out a few errors:

1. Jobs ignored Wall Street, too. In fact, Cook has been significantly more willing to share information than Jobs. And I don't see any sign that Cook is defending Apple's brand any less than Jobs. In fact, his openness to sharing more information seems to be directed at reinforcing the brand. Since Jobs didn't do that, it could be argued that Cook is doing more to defend the brand than Jobs did.

2. Cook is entirely right to focus on the business. That does more for the value of the company (at least in the long run) than trying to manipulate stock.

3. Cook and the board of directors ARE significant owners of Apple. Not entirely, but they own more shares than 99+ % of shareholders.

4. Even if Cook and the Board didn't own any AAPL, their job is to maximize the value of the company. They do that by focusing on operations and new products. Playing games with the stock manipulators does absolutely nothing to enhance the value of the company.

5. Cook and the Board are not oblivious to shareholder concerns. They address them in every conference call. More importantly, they started issuing a dividend last year in response (at least partially) to shareholder concerns.
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
Reply
"I'm way over my head when it comes to technical issues like this"
Gatorguy 5/31/13
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post #26 of 64
Quote:
Originally Posted by zoffdino View Post

... Tim Cook and the Board of Director have so far come across as arrogant and oblivious to shareholder concerns. After all, they don’t own the business, the shareholders do. ...

 

Actually, neither the shareholders nor the BoD own Apple. Apple, as a corporation, owns itself. The BoD members don't, as a function of being on the Board, own anything. All the shareholders own are stocks issued by Apple, not Apple itself.

 

Perhaps the term 'shareholder' is the source of confusion here. It would be better to call them 'stockholders' since 'share' just means that, stock, not a part of the company.

post #27 of 64
I agree, wall street can go to hell. Apple don't need them imho. How did any of those muppets help Apple in the grey days? Btw, I'm a small AAPL shareholder and I'm more than happy for Apple to do what Apple decide. I'd rather Apple had a large war-chest than give it all away to short-term speculators that will just sell and take the cash.
post #28 of 64
Preferred stock holders owns a percentage of equity of the company, but no voting power.

Common stock holders have no equity ownership, but has voting power.

Both still earns dividends.
post #29 of 64
This stock is a toxic dog and all the financial wrangling in the world isn't going to change a thing. If investors see the current stock as unworthy of their attention, then I think they should just go invest in other stocks. They have no interest in Apple, they just want to make quick money. Wall Street already believes Apple is going to fail. They've said it enough times. The news media says the same thing over and over again. Let's see they're right. Apple should continue to pay a small dividend and leave the bulk of cash alone. If the claims are true that Apple will be destroyed by Samsung and Android, then Apple should just hold onto all that reserve cash to survive a bit longer.

It will be interesting exactly how big a pile they'll make. Maybe they'll be able to buy up all the companies that Wall Street thinks are so much better buys than Apple is. Apple should tell all the hedge funds to go to hell. They're nothing but leeches and parasites. As a long-term shareholder I'm already resigned to take the dividends because Apple's share price will never go up again to former levels. In Wall Street's minds, Apple can't beat the likes of Google, Amazon, Netflix, LinkedIn, etc., so that's all there is to it. Apple will never be able to have a P/E in the 600s, 800s or 3500s. It will just have to continue to make money the old fashioned way to hold even a little bit of its share value.
post #30 of 64
Quote:
Originally Posted by anonymouse View Post

Actually, neither the shareholders nor the BoD own Apple. Apple, as a corporation, owns itself. The BoD members don't, as a function of being on the Board, own anything. All the shareholders own are stocks issued by Apple, not Apple itself.

 

Perhaps the term 'shareholder' is the source of confusion here. It would be better to call them 'stockholders' since 'share' just means that, stock, not a part of the company.

Apologies, but your post does not make any sense to me.

 

Let me ask you this: If you bought a house with your own money, does the house belong to you?

post #31 of 64

I have been saying this for six months now: what Apple needs to announce is a one-time $40B share repurchase, which can be funded by cash in the US. Don't increase dividends. (None of the 'GOUPS' nonsense either.)

 

Why?

 

For at least five reasons: (i) Positive signal about future cash flow prospects ("We think our own stock is seriously undervalued and hence a good investment, even if you don't think so, and I am willing to put our money where our mouth is"); (ii) It is more tax efficient way to return cash to investors; (iii) Keeping it as treasury stock mitigates future dilution from employee stock option exercises; (iv) It silences -- at least temporarily -- the 'value' investors who are constantly demanding cash back; (v) It mitigates the temptation for wasteful acquisitions (not that Apple would be that foolish, but why take the chance.....).

post #32 of 64
Brian white. Making noise again. Yet no substance to his writings. Time for mr white to become an analyst not an anal-ist.
post #33 of 64
Apple is doomed. Preferred stock is their LAST CHANCE at relevance.
A.k.a. AppleHead on other forums.
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A.k.a. AppleHead on other forums.
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post #34 of 64
Quote:
Originally Posted by woodbine View Post

Debt: the slippery road to being owned by Wall street

Exactly. Hence their wish to do this ...
Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
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Enjoying the new Mac Pro ... it's smokin'
Been using Apple since Apple ][ - Long on AAPL so biased
nMac Pro 6 Core, MacBookPro i7, MacBookPro i5, iPhones 5 and 5s, iPad Air, 2013 Mac mini.
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post #35 of 64

Share buybacks are theoretically ideal.  But in a sentiment driven market, buybacks can backfire.  What if Apple soaked its money into $500/sharre and it went down to $200/share?  The money would be gone with zero value created.  That's because sentiment and faith are still a big part of the stock at $500/share.  

 

We have no idea how Apple will make money in 2015-2020.  Just no idea.  I'm not saying they won't, but they will have to start innovating.  Otherwise they are no different from a breakfast cereal company -- all advertising, packaging and zero high tech creativity.  As a low profit commodity producer, Apple is worth $200/share.

 

I'd much rather see them buy Exxon stock with that money.  Pull a Warren Buffet with that shit.  

post #36 of 64
Quote:
Originally Posted by anantksundaram View Post

Apologies, but your post does not make any sense to me.

 

Let me ask you this: If you bought a house with your own money, does the house belong to you?

 

Let me ask you this: Is a house a corporation?

post #37 of 64
Quote:
Originally Posted by bwik View Post

Watch men who create nothing froth at the mouth for Apple's worth and credibility.  Apple was originally run by a man who created things.  That is what creates true wealth and value.  You can engineer Apple's balance sheet to hell and back and it won't add one cent of fundamental value.  MBAs should be running pencil factories and selling breakfast cereal.  Apple's business model is anti-MBA and that has been the source of its value.  Watching Apple end that innovative run is a little sad.

 

Apple already had a MBA sugar water salesman at the helm and we all know how that turned out. Biggest mistake Jobs ever made.

post #38 of 64
Quote:
Originally Posted by zoffdino View Post

You cannot begin to understand the frustration of being an Apple shareholder. The company is being bashed on the daily basis, which I frankly question: “what’s wrong?” Yesterday there was a rumor of Foxconn hiring freeze, which was quickly translated to Apple cutting production for iPhone 5 due to slow demand. Even after it was clarified by another Foxconn PR person that it was due to better than expected employee retention rate, the stock still performed badly.

What’s more frustrating is Apple’s management denial that there is a problem with the shareprice. Time after time, Tim Cook said that he wants to focus on delivering great products; Wall Street will follow later. What he fails to recognize is Apple the brand is being tarnished, it’s being ridiculed as not cool enough, that users are abandoning it. Steve Jobs hated Wall Street and would have done the same, but he would have defended the brand to his last breath. Tim Cook and the Board of Director have so far come across as arrogant and oblivious to shareholder concerns. After all, they don’t own the business, the shareholders do.


Tim Cook has been out stumping for Apple iin a backhanded way, which is maybe the only way he can do anything without lowering himself and the company to the level of the insane anti-Apple meme-mongers. Check out this collection from the pages of AI:

http://appleinsider.com/topics/tim_cook

I'm sure they're working hard to figure out how to counter this trend. They lost a lot of good will by going after Samsung and HTC. Maybe they had to do it, to set a legal price for Samsung's level of copying, but it was damaging to their tech press cred, seems to me.

The legal messes seem to be ending. Now how else could they fight bad PR without looking weak and defensive?
post #39 of 64
Originally Posted by mvigod View Post
Apple knows it needs all that money to survive the coming competition and margin compression

 

Go away.

 

Originally Posted by jrogowsk View Post
I urge Apple management to pay attention to the mistakes of other firms in Silicon Valley, such as HPQ.

 

I urge Apple management to ignore everything done by everyone and keep doing what they're doing now.

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
Reply
post #40 of 64

Count me in as one of the greedy people!

 

I was against the whole dividend payout to begin with. I said at the time that Apple should either offer a larger dividend or no dividend at all. I heard all of these stories about how hedgefunds and institutions would now love Apple because of the dividend, and it seems like the exact opposite turned out to be true. I also heard these stories about how certain funds were not allowed to hold a stock that didn't pay out a dividend, and tons more funds would be buying up AAPL because of the dividend. A whole lot of good that dividend has done right? AAPL has gone south since the dividend, and we now see articles about how hedgefunds are actually pulling out of AAPL and minimizing their holdings.

 

So, I wouldn't mind a larger payout, bring it on. Either that, or Apple should do a large buyback of shares. Why isn't Apple investing in itself at this ridiculous cheap share price?

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