or Connect
AppleInsider › Forums › Investors › AAPL Investors › RBC believes Apple Inc. could double $60B share buyback, ups price target to $525
New Posts  All Forums:Forum Nav:

RBC believes Apple Inc. could double $60B share buyback, ups price target to $525

post #1 of 37
Thread Starter 
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.

RBC


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.
post #2 of 37
Quote:
Originally Posted by AppleInsider View Post

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.

RBC


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.

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.
"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
Reply
post #3 of 37
We don't care about analysts. We dislike analysts. Analysts are pond scum - harsh perhaps, but they do not care about Apple long term - they want cash now. Apple needs to focus on products and excellence. Share buy backs are good for shareholders, which I like, but Icahn and the analysts should bugger off. This is not a long term strategy for products.
post #4 of 37
I do not have the feeling Carl Icahn has Apple's best interest in mind. He is in this to make quick billions. There is nothing wrong with Apple pursuing its current repurchase plan, which has actually retired more shares more quickly than expected.

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!
post #5 of 37
I don't really understand why everyone wants Apple to blow all their money buying back shares instead of developing new products with it.
post #6 of 37

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.

post #7 of 37
Quote:
Originally Posted by Mooch View Post

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

post #8 of 37
Quote:
Originally Posted by herbapou View Post

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.

na na na na na...
Reply
na na na na na...
Reply
post #9 of 37
Quote:
Originally Posted by Mooch View Post

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.

na na na na na...
Reply
na na na na na...
Reply
post #10 of 37

A stock repurchase might stew volatility. Less stocks for speculators

post #11 of 37
AAAAAAAND that's why I said yesterday that "Apple has cash for 20 years of operation" willnever survive the reality of analysts/'investors'...

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

Reply

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

Reply
post #12 of 37

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).

post #13 of 37
Quote:
Originally Posted by herbapou View Post

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.

post #14 of 37
These people will lower aapl target price after 10th September as iPhone 5c will affect iPhone profit margin .
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 ……
post #15 of 37
Since we can already guess with the analysts are going to write the day of or the day after Apple announces its new products, let's target which analysts are going to do the writing. This way we could beat them to the punch and let them know that we already knew what they were going to write because we wrote it for them!
post #16 of 37
Quote:
Originally Posted by island hermit View Post


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.

Help! I'm trapped in a white dungeon of amazing precision and impeccable tolerances!

Reply

Help! I'm trapped in a white dungeon of amazing precision and impeccable tolerances!

Reply
post #17 of 37
Quote:
Originally Posted by island hermit View Post


Oh, sure, lower the corporate tax rate and increase the personal tax rate... just like Canada.

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.

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #18 of 37

Buy some really great innovative companies! Dominate the entertainment business world!

post #19 of 37
Quote:
Originally Posted by AppleInsider View Post

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?

post #20 of 37
Originally Posted by SpamSandwich View Post
(Google it)

 

Blasphemy.


…shut down our many military bases from South Korea… …not needing American military occupation.

 

I like how subtle this is. 1biggrin.gif

Originally Posted by asdasd

This is Appleinsider. It's all there for you but we can't do it for you.
Reply

Originally Posted by asdasd

This is Appleinsider. It's all there for you but we can't do it for you.
Reply
post #21 of 37
Quote:
Originally Posted by island hermit View Post


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.


Edited by herbapou - 8/15/13 at 10:07am
post #22 of 37

Lets get real guys.  Is it Apple's goal to reach $200B in cash?  I don't think so.  Bottom line is they are generating $40-$50B in free cash flows each year.  What else are they going to do with the money?  If they don't increase the buyback/dividend they will have over $400B in cash in 5 years.  Then what?  There is no company out there worth Apple's money to buy that cost over $100B.  Look what Motorola is doing after Google bought them.

 

Bottom line is no company needs over $150B in cash if they are not going to make a very large acquisition (Apple never has).  I think doing another buyback after the current one is done in 2015 is wise.  But don't go crazy.  $20B a year would work well, with Apple pocketing the other $30B.

 

Look what IBM has done over many years.  At its peak it had 2.41 Billion shares.  Now it only has 1.09 Billion shares.  I'd say Apple should do the same.  Slowly buy back shares each year as long as there is excess cash and future outlook looks good.

 

http://ycharts.com/companies/IBM/shares_outstanding

post #23 of 37

Ah yes a highly courageous analyst call.

 

Apple is at 500 so 525 is possible!  If AAPL was a 50 dollar stock the call would have them rise to hold it.....52.5 wow what a gain.

 

 

Or did he mean AAPL could go up one day 25$??

post #24 of 37
Quote:
Originally Posted by leavingthebigG View Post

I do not have the feeling Carl Icahn has Apple's best interest in mind. He is in this to make quick billions. There is nothing wrong with Apple pursuing its current repurchase plan, which has actually retired more shares more quickly than expected.

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!

I agree and I seriously doubt Tim will be taking instructions from him or anyone else on how to run Apple.
Use duckduckgo.com with Safari, not Google Search
Been using Apples since 1978 and Macs since 1984
Long on AAPL so biased. Strong advocate for separation of technology and politics on AI.
Reply
Use duckduckgo.com with Safari, not Google Search
Been using Apples since 1978 and Macs since 1984
Long on AAPL so biased. Strong advocate for separation of technology and politics on AI.
Reply
post #25 of 37
Quote:
Originally Posted by herbapou View Post

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.

The nominal US corporate tax rate of 35% is a lie designed to fool us all. The effective (actual) corporate tax rate in the US is much lower than in most countries, at around 12% after credits and deductions (it was 12.1% in 2011). We can argue whether 12% is too low or too high, but lets not use the idiot number of 35%.

Macintosh 512Ke.......

Reply

Macintosh 512Ke.......

Reply
post #26 of 37
When the share prices are way undervalued [and for a routine company not a growth company P/E of 20 is nominal] and it is at 10-12X now and if you discount cash closer to 8-10X, then this is a good time to buy back shares at a steep discount. This was Buffet's guidance, "... Regarding the option of repurchasing Apple stock, Buffett offered a simple guideline: If you believe your stock is cheap, "then the best thing you can do with your cash is buy in shares." ..." Salena Maranjian, June 19 2013.

So its not about Icahn its about a great opportunity that the market has created for Apple to get back shares at a bargain. In the long run this will enhance company value and for those investors in for the long haul will see great return.

Apple could easily spend its annual earnings going forward on stock re-purchase while retaining a huge hoard of funds to avoid loans and make major purchases. One might disagree on the amount to be spent, but as long as the market is so dramatically undervaluing Apple stock and Apple's long term prospects [and Cook would know] are bright its not about if, rather about how much.
post #27 of 37
Quote:
Originally Posted by JONOROM View Post


The nominal US corporate tax rate of 35% is a lie designed to fool us all. The effective (actual) corporate tax rate in the US is much lower than in most countries, at around 12% after credits and deductions (it was 12.1% in 2011). We can argue whether 12% is too low or too high, but lets not use the idiot number of 35%.

 

That average rate includes all the offshore tax dodging. The real ratio is more like 25% on tax credit alone. The system doesnt allows cash to return into the US and this is where it fails.

 

Lower the rate, remove the gimmics. Simple.

post #28 of 37
Quote:
Originally Posted by herbapou View Post

That average rate includes all the offshore tax dodging. The real ratio is more like 25% on tax credit alone.

Reference for this? Your number suggests that half of US corporate profits are held overseas.

Macintosh 512Ke.......

Reply

Macintosh 512Ke.......

Reply
post #29 of 37
Quote:
Originally Posted by herbapou View Post

 

We have bigger personnal tax rates because it includes health insurance, not because of corporate taxes...

 

Just. Keep. Believing. That.

na na na na na...
Reply
na na na na na...
Reply
post #30 of 37
Quote:
Originally Posted by lkrupp View Post

 

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?


It's good for the company if it is prudent leveraging of cash/assets.  If borrowing costs are low, then it makes absolute sense to leverage that debt into increased positions + less dividend payout + increased market value.

 

A better question to ask would be: how much cash is needed to ensure successful operations, investment and contingency?  Anything more than that should be utilized to increase company value whether it be investments or a return of investment to share holders.

 

But I totally agree with your opinion that Icahn's motive is purely for his short term monetary gain.  And for that, I hope that Tim gives him the middle finger.

post #31 of 37
Quote:
Originally Posted by lkrupp View Post
What does this leave for R&D, which has been a kind of sore spot for me?

What exactly is your 'sore spot' with Apple's R&D?

post #32 of 37
Quote:
Originally Posted by Tallest Skil View Post

Blasphemy.

I like how subtle this is. 1biggrin.gif

Ha!

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #33 of 37

Downside of $350... With $147 per share in cash?  


Edited by Red Oak - 8/15/13 at 5:25pm

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

Reply

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

Reply
post #34 of 37
I have a better idea.

Instead of taking 115 BILLION dollars to buy back shares to "boost the stock price", invest the money as Steve would have--in making the awesome products we all know and love and buy and buy again.

THAT is what boosted the stock price to its current levels, and what will keep the company strong in the years to come.

These speculators care nothing about the company or the products we love. They just care about making (more) money. They've never actually produced anything, except perhaps gambling receipts. Let them go speculating on another company.
post #35 of 37
Quote:
Originally Posted by Albertadoc View Post

I have a better idea.

Instead of taking 115 BILLION dollars to buy back shares to "boost the stock price", invest the money as Steve would have--in making the awesome products we all know and love and buy and buy again.

THAT is what boosted the stock price to its current levels, and what will keep the company strong in the years to come.

These speculators care nothing about the company or the products we love. They just care about making (more) money. They've never actually produced anything, except perhaps gambling receipts. Let them go speculating on another company.

 

 

Apple is netting $40-$50B in free cash flow a year.  They literally can't spend the money fast enough with acquisitions or R&D.  I would rather them increase the div/buyback then waste money on a large acquisition that could be a money pit for years (see Google's purchase of Motorola).  They already have $150B in cash and that will grow to $350B in 5 years if they don't increase their capital allocation.

post #36 of 37
Originally Posted by Albertadoc View Post
I have a better idea.

 

Shush now. 1tongue.gif


Let them go speculating on another company.

 

See, they'll never do that unless Apple goes private again, which is nothing but a pipe dream.

Originally Posted by asdasd

This is Appleinsider. It's all there for you but we can't do it for you.
Reply

Originally Posted by asdasd

This is Appleinsider. It's all there for you but we can't do it for you.
Reply
post #37 of 37
Quote:
Originally Posted by Albertadoc View Post

I have a better idea. ...

 

"I have a better idea", let Tim Cook run the company, he is doing a good job.

New Posts  All Forums:Forum Nav:
  Return Home
  Back to Forum: AAPL Investors
AppleInsider › Forums › Investors › AAPL Investors › RBC believes Apple Inc. could double $60B share buyback, ups price target to $525