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Apple Inc. stock recaptures $500 as Carl Icahn shows support, hype for new iPhones builds

post #1 of 30
Thread Starter 
With Apple apparently set to debut its latest iPhone models at a media event on Sept. 10, and strong support from a high-profile billionaire investor, the company's stock surged beyond the $500 mark on Wednesday, the first time it has crossed that threshold since January 23.

Apple


The milestone came a day after billionaire investor Carl Icahn publicly expressed his support for Apple, calling the company's stock "extremely undervalued." As of Wednesday afternoon, shares of Apple were up more than $11 for the day alone.

Icahn also noted on Tuesday that he spoke with Apple Chief Executive Tim Cook in an effort to persuade him to initiate a larger share buyback. The company has already committed to spend $100 billion through 2015 on share repurchases and an increased quarterly dividend.

The support from Icahn has clearly encouraged other investors to buy in to Apple ahead of the company's Sept. 10 event. Those shareholders may see Icahn as having the ability to convince Cook to increase the buyback and add value to shares of AAPL and boost earnings per share.

The billionaire investor revealed on his official Twitter account this week that he has a "large position" in Apple. That's amounted to an investment of some $1.5 billion in the iPhone maker, according to The Wall Street Journal.

Apple's surge also comes just days after it was reported that Apple is planning to hold a media event in September to announce its next-generation iPhone. The company is also expected to debut a new low-cost iPhone with a plastic frame that could help the company capture a larger portion of the overall smartphone market.

Shares of Apple also performed well in the month of July, helping the company reclaim the title of world's most valuable, based on market capitalization. Apple and Exxon Mobil have traded places in that distinction a number of times in recent years.

While Apple has surpassed $500 as of Wednesday afternoon trading, the company's shares are still well off from its high of $702.10, reached nearly a year ago ahead of the launch of the iPhone 5.
post #2 of 30
Buy buy buy !!!!
post #3 of 30
I am buying buying today tonight tmr
post #4 of 30
Apple is DOOMED! Tim Cook should be FIRED! Most Valuable Company (Market Cap) in the WORLD! What a Failure!!!!

/s
post #5 of 30

Gotta laugh at all the concern trolls like Henry Blodget saying Tim Cook has more important things to be worrying about than meeting with Ichan.  As if Cook can't walk and chew gum at the same time.  Besides the people most focused on new products are doing just that.

post #6 of 30
As a small shareholder -- in fact, Apple is likely a larger part of my portfolio than it is Icahn's -- what do I need to do to get Cook's attention? After all, it's not like Icahn owns a majority of Apple.
post #7 of 30
I believe in Apple and Cook. Also in products like Low-cost iPhone. It will really hit the market and be the best iPhone EVER (:-)
post #8 of 30
I was watching a Bloomberg video that had Gene Munster talking about it is feasible for Apple to take on an additional $150 billion in debt to fund a stock repurchase ON TOP of the current billions of debt Apple has already taken on because... Interest rates are low!

Talk about The MORONIC GREED of Wall Street! Take on $250 billion of debt to return money to shareholders!! Really?????

Microsoft has spent $250 billion over a decade repurchasing its stock only to see the stock languish.

I hope Tim and the Apple board choose not to take on this kind of astronomical debt just to help Wall Street make a quick buck.
post #9 of 30
Quote:
Originally Posted by anantksundaram View Post

As a small shareholder -- in fact, Apple is likely a larger part of my portfolio than it is Icahn's -- what do I need to do to get Cook's attention?

Spend half a million dollars buying coffee with Cook.
"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 #10 of 30
Quote:
Originally Posted by leavingthebigG View Post

Talk about The MORONIC GREED of Wall Street! Take on $250 billion of debt to return money to shareholders!! 

Actually it does make sense not so much as a dividend but to repurchase shares. They can't repatriate their off shore cash without paying high taxes on it. The interest payments on the debt are also tax deductible.

 

I don't know if adding more debt to repurchase more shares makes sense, but the concept is not completely ill-conceived.

Life is too short to drink bad coffee.

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Life is too short to drink bad coffee.

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post #11 of 30
Quote:
Originally Posted by anantksundaram View Post

As a small shareholder -- in fact, Apple is likely a larger part of my portfolio than it is Icahn's -- what do I need to do to get Cook's attention? After all, it's not like Icahn owns a majority of Apple.


Stand on his lawn naked.

 

... but it might not be the type of attention you want. 1tongue.gif

na na na na na...
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na na na na na...
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post #12 of 30

Great news about the stock price, but I'm not a fan of Icahn: guy's a serial troublemaker.

post #13 of 30
Quote:
Originally Posted by leavingthebigG View Post

I was watching a Bloomberg video that had Gene Munster talking about it is feasible for Apple to take on an additional $150 billion in debt to fund a stock repurchase ON TOP of the current billions of debt Apple has already taken on because... Interest rates are low!

Talk about The MORONIC GREED of Wall Street! Take on $250 billion of debt to return money to shareholders!! Really?????

Microsoft has spent $250 billion over a decade repurchasing its stock only to see the stock languish.

I hope Tim and the Apple board choose not to take on this kind of astronomical debt just to help Wall Street make a quick buck.


Actually the stock buyback is better for the current holders of Apple then the dividend.  The stock buyback increases the EPS as there are fewer outstanding shares to spread the earnings around too.  It is a good thing to buy your own company stock if it is greatly undervalued AND you have the money.  Apple should be buying stock back until the price reaches 600, past that point it does not make as much sense.

post #14 of 30
Quote:
Originally Posted by island hermit View Post

Stand on his lawn naked.

 

... but it might not be the type of attention you want. 1tongue.gif

 

Quote:
Originally Posted by jragosta View Post

Spend half a million dollars buying coffee with Cook.

I realize you guys are trying to be tongue-in-cheek, but I am bringing up a larger issue here. Perhaps it's valid, perhaps it's not.

 

Small shareholders like me -- whose stocks are typically held in Street Name -- probably collectively own more than, say, a Icahn or Einhorn does. Yet, these guys and their views on what Apple should or should not do gets all the attention. (I can understand the attention from the CNBCs of the world, but they are also able to get the ear of Apple's CEO and Board).

 

Let us suppose that small shareholders have a view that is different from that of an Icahn or Einhorn. How do they get heard? Sure, I can write to Apple's IR or Tim Cook, but how do I know that the CEO or CFO got the message?

 

I happen to think it's a non-trivial issue, since institutions -- especially activist hedge funds -- influence more and more of the conversation in large company boards (e.g., P&G, Dell, Herbalife, Sony) If you look at the origins of the US corporate governance system, it was based on the idea of shareholder democracy. The SEC was originally set up to look after small, retail shareholders like us. I wonder what one needs to do, whom one needs to get in touch with, to make sure that the balance is re-tilted at least slightly less toward the institutional holder. (I am not talking about their right to buy/hold/sell, but rather their undue -- sometimes negative -- influence on corporate affairs).

post #15 of 30
Quote:
Originally Posted by leavingthebigG View Post

Microsoft has spent $250 billion over a decade repurchasing its stock only to see the stock languish.

I hope Tim and the Apple board choose not to take on this kind of astronomical debt just to help Wall Street make a quick buck.

There's no evidence of causation that MS's stock buyback caused the stock price to languish over the last ten years.

 

In the end, it's a math calculation. Does it financially make more sense to borrow money at low interest rates to buy back stock at a low price, knowing that Apple generates more than enough cash to pay the loan and take the interest tax deduction. What exactly should Apple be doing? Its first priority is to run its business well and acquire new customers. Its second priority is to generate value for its shareholders.

post #16 of 30
Quote:
Originally Posted by leavingthebigG View Post

I was watching a Bloomberg video that had Gene Munster talking about it is feasible for Apple to take on an additional $150 billion in debt to fund a stock repurchase ON TOP of the current billions of debt Apple has already taken on because... Interest rates are low!


It would actually be a good idea to do this while interest rates are low like this - the interest paid would not matter that much, since the company would be saving money on dividends for the repurchased stock (which are about the same amount as the interest on the borrowed money).

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45 2a3 300b 211 845 833
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post #17 of 30
Originally Posted by Rogifan View Post

Gotta laugh at all the concern trolls like Henry Blodget saying Tim Cook has more important things to be worrying about than meeting with Ichan.  As if Cook can't walk and chew gum at the same time.  Besides the people most focused on new products are doing just that.

 

LOL.  "Concern trolls" are by far the most effective.  Unless they are spotted and called out.

And man, there are lots of near-perfect concern troll posts at AppleInsider, no?

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Sent from my iPhone Simulator

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post #18 of 30
Maybe I am missing something when it comes the nonchalant attitude of taking on debt. Just because Apple is generating a lot of cash today does not mean it will be generating a lot of cash tomorrow. Carrying $250 billion of debt seems crazy to me. Giving shareholders a short-term happy while risking long-term viability is the Wall Street way not the Apple way. I could be wrong.
post #19 of 30

I for one, do not think that the announcement of new iPhone/iPad models is the only news here.

Maybe Apple finally got China Telecom and its potential 700 million customers on board. Just think that 5% of 700 M is 35 M. 

post #20 of 30

They're not taking on more debt than they have cash to repay -- right now -- if they had to. They're choosing to take out the debt because they believe it's cheaper to pay for debt and bring back the cash to the US when a friendlier tax circumstances happen.

post #21 of 30
I think Icahn has a valid point

It makes sense to borrow money at 3% to buy back stock and push the share price up to $600

rough calculation

Buy $100B worth of shares at 3% costs 103B over a certain term

According to my calculation if share price goes to $600 thats a 9% gain based on an average buying price of 550 ie 50/550

thats about 9% "profit" on a total purchase of 100Billion. That is called a no brainer!
what is the money doing offshore? I don't think it is making 9% now is it?
The point is that they can leverage it to make more money by borrowing and using offshore cash as collatoral, 100B at 3% or less - and pay the principle off at 3% over a number of years. i.e use future profits to pay the loan which is also before taxes I believe? Basically the cash hoard can be reduced and the benefit is to stock price is kept really high and it makes the company more attractive to investors
Edited by Paul94544 - 8/14/13 at 1:19pm
post #22 of 30
Quote:
Originally Posted by TheDBA View Post

I for one, do not think that the announcement of new iPhone/iPad models is the only news here.
Maybe Apple finally got China Telecom and its potential 700 million customers on board. Just think that 5% of 700 M is 35 M. 

China Mobile?
post #23 of 30
Quote:
Originally Posted by Paul94544 View Post

I think Icahn has a valid point

It makes sense to borrow money at 3% to buy back stock and push the share price up to $600

rough calculation

Buy $100B worth of shares at 3% costs 103B over a certain term

According to my calculation if share price goes to $600 thats a 9% gain based on an average buying price of 550 ie 50/550

thats about 9% "profit" on a total purchase of 100Billion. That is called a no brainer!
what is the money doing offshore? I don't think it is making 9% now is it?
The point is that they can leverage it to make more money by borrowing and using offshore cash as collatoral, 100B at 3% or less - and pay the principle off at 3% over a number of years. i.e use future profits to pay the loan which is also before taxes I believe? Basically the cash hoard can be reduced and the benefit is to stock price is kept really high and it makes the company more attractive to investors

That's not the way such a decision would be considered. There is no 'profit' at all - unless you sell more shares at 600 (in your example) and that's not in the cards.

Rather, the decision is one of "we have $x billion domestically and $y billion overseas. We want to maximize shareholder value. How do we do that?"

It seems that their decision was that they were generating plenty of profit both domestically and overseas to pay off the loan and they didn't have anything better to spend that money on.
"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 #24 of 30

I am glad I bough in at $400 when almost everyone here said I was crazy.....

post #25 of 30
I cahn do it!
post #26 of 30
This AAPL rally won't last. And AAPL will continue to trade sideways as long as they continue to issue these dividends. The smart money is going in to Amazon.com.
post #27 of 30
Quote:
Originally Posted by jragosta View Post


That's not the way such a decision would be considered. There is no 'profit' at all - unless you sell more shares at 600 (in your example) and that's not in the cards.

Rather, the decision is one of "we have $x billion domestically and $y billion overseas. We want to maximize shareholder value. How do we do that?"

It seems that their decision was that they were generating plenty of profit both domestically and overseas to pay off the loan and they didn't have anything better to spend that money on.

 

I respectfully disagree sir, yes I Agree they don't make a classical profit because as you point out you they can't sell them, but for all intents and purposes they are indeed making a "profit" in the sense that each share they own is worth more implicitly because there are less of them available in the float thereby causing the stock to rise. The profit they make in the USA is reduced in future years because they have to service the debt - this reduces taxes they owe in the US without really costing them anything, in fact it saves money. I assume they pay their suppliers mainly from their offshore accounts
post #28 of 30
Originally Posted by Potsie Webber View Post
The smart money is going in to Amazon.com.

 

HA HA H AH AH AH A HA HA HA H AH AH!
 

jragosta, have a look at this one! BA HA HA!

Originally Posted by asdasd

This is Appleinsider. It's all there for you but we can't do it for you.
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Originally Posted by asdasd

This is Appleinsider. It's all there for you but we can't do it for you.
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post #29 of 30
Quote:
Originally Posted by Potsie Webber View Post

This AAPL rally won't last. And AAPL will continue to trade sideways as long as they continue to issue these dividends. The smart money is going in to Amazon.com.

lol.. that is right. Don't invest in ANY company making profit and doing any profit sharing. /s

"Building for the future?! They should be running around reacting to the present!" -John Moltz
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"Building for the future?! They should be running around reacting to the present!" -John Moltz
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post #30 of 30
I believe that 150 Billion is too much, but not 100 B if it is limited by the PE of the stock . There is no reason to buy rapidly above 15 PE . I would use 25 % of cash earnings each Q from over seas to buy back stock between 15 and 20 PE. I would retire debt over 20 PE. I would stop acquiring debt atfter the net of cash minus debt minus the cost of repatriating the debt leaves $50 B in cash reserves. What you are buying is future Apple earnings. Given managements knowledge of the pipeline that should be a very safe bet.
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