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Apple's $44 billion in stock buybacks have helped increase market cap by $100 billion

post #1 of 135
Thread Starter 
Apple's capital return program, focused on buying back stock, does appear to have had a favorable impact on Apple's share price. After spending $44 billion on stock buybacks over the past four quarters, Apple's stock has risen 29.2 percent or $129.28, a contribution that moved the company's market cap from $392 billion a year ago to $492 billion today, even as the company removed 80 million shares from circulation.


Source: Ycharts.com


Removing 80 million shares from the market would seemingly have a negative impact on Apple's market cap, were the price per share not to also rise. Market cap is a company's stock price multiplied by the shares outstanding, and so is used as a convenient way to establish what the market has decided a company is worth.

In an ideally rational market, removing shares would simply increase the stock price to maintain the same market cap, because investors would "know" that fewer remaining shares in the same company would be worth more, if all other factors remained constant.

However, in addition to the number of shares changing due to Apple's buybacks, the company is also reporting improved fundamentals. Investors also have external concerns related to currency markets and the performance of Apple's competitors and other related and unrelated economic factors.

Add in a variety of other irrational factors and a complex picture emerges that, while apparently helping to reverse the direction Apple's stock price to reach the highest point since late 2012, Apple's stock still hasn't exceeded levels first seen in March 2012 or the all time peak reached in September 2012, when Apple shares hit $700, achieving a market cap north of $657 billion.

To return to its peak market cap valuation from September 2012, Apple's stock price would today need to reach above $760.

$104.3 million less in dividend payments after buying back shares



Apple now has 861.74 million shares outstanding, a significant drop from just one quarter ago when it had 892.55 million outstanding shares. The company's stock buyback program acquired 31.7 million shares in the March quarter, and will retire them.


Source: Ycharts.com


Having 31.7 million fewer shares outstanding means that Apple will pay out $104.3 million less in its total dividend payments this quarter.

While it now has 861.74 million outstanding shares, Apple has 1.8 billion authorized common shares, allowing it nearly a billion shares which it could offer for sale or grant to employees or use for other reasons.

However, issuing authorized stock (whether as a public stock offering in the form of stock based compensation) has the opposite effect of stock buybacks. It would dilute the value of Apple's other outstanding shares and have a negative impact on EPS.

As visible in the chart above, Apple's aggressive buyback program has, since the middle of 2012, sharply reversed Apple's previous trend of diluting outstanding shares with stock based compensation. Apple's outstanding share count has now returned to levels not seen since the summer 2007, back when Apple's shares were valued around $125.
post #2 of 135

Somebody has to be stupid if they think all market cap raise is due to buyback. Seriously AI?

Out of that 100B,40B came in just a day of result, Where they can't even trade in that lockout time.

post #3 of 135
Have helped seems to be an important part of the title of this article.
post #4 of 135
Quote:
Originally Posted by Drunkzombie View Post

Have helped seems to be an important part of the title of this article.

'...may have helped...' would have been better.
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post #5 of 135
Quote:
Originally Posted by shahhet2 View Post
 

Somebody has to be stupid if they think all market cap raise is due to buyback. Seriously AI?

Out of that 100B,40B came in just a day of result, Where they can't even trade in that lockout time.

 

If you read the article you wouldn't wildly leap to the conclusion you reached by just looking at the headline.

 

"in addition to the number of shares changing due to Apple's buybacks, the company is also reporting improved fundamentals ...

"Add in a variety of other irrational factors and a complex picture emerges that"

 

Buybacks have clearly helped, but just looking at the market cap chart there at the start of the article, Apple's change in market cap hasn't been some simple, direct result of a single cause.

 

There is also ~ $150B worth of lost ground for Apple to reclaim. 

post #6 of 135
I no longer trust anything Dilger writes. His spin is credibility damaging. Has anyone else done the math on this?
Edited by SpamSandwich - 4/25/14 at 4:29pm

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #7 of 135
Quote:
Originally Posted by shahhet2 View Post
 

Somebody has to be stupid if they think all market cap raise is due to buyback. Seriously AI?

Out of that 100B,40B came in just a day of result, Where they can't even trade in that lockout time.

Market Cap is based on the stock price multiplied by the number of shares outstanding.  So you have to calculate the Market Cap before and after to see if it has an impact or not.  If they are buying back shares and the share price stays the same, then it shouldn't, but if the price goes up to the point where it does increase Market Cap, then it does.  The thing is, that market cap is going to change constantly afterwards because the stock price changes.  Maybe it did increase the Market Cap (TEMPORARILY) long enough for them to say it increased the Market Cap and then the stock price changed later to decrease the Market Cap below the buyback.  :-)

 

What's funny is that some of what is said is a temporary thing that doesn't last that long or doesn't matter in the long run.

post #8 of 135

On March 19, 2012 AAPL closed at $601. Later that day Apple first announced they were going to initiate dividends and buybacks.

Like clockwork, naive fanbois convinced each other it was a great idea because fewer shares on the market will make the stock price go up.
It didn't happen.

Just 2 years later, April 23, 2014, AAPL closed at $524. Down 14%.
During the same time, AMZN went from $185 to $324. Up 75%.

Now Apple is multiplying available shares.

Why the complete turn around? Apple couldn't fool enough people?

As I have said before, just because a company makes a lot of profit, it doesn't mean their stock will go up.

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post #9 of 135

Buy low, sell high and make a decent ROI after taxes.  If so, you doing better than the others that lost money.  That's all that really matters with regards to buying and selling stocks.  :-)

post #10 of 135
Quote:
Originally Posted by Russell View Post
 

On March 19, 2012 AAPL closed at $601. Later that day Apple first announced they were going to initiate dividends and buybacks.

Like clockwork, naive fanbois convinced each other it was a great idea because fewer shares on the market will make the stock price go up.
It didn't happen.

Just 2 years later, April 23, 2014, AAPL closed at $524. Down 14%.
During the same time, AMZN went from $185 to $324. Up 75%.

Now Apple is multiplying available shares.

Why the complete turn around? Apple couldn't fool enough people?

As I have said before, just because a company makes a lot of profit, it doesn't mean their stock will go up.

 

You are looking at whether the news of Apple's capital return program created some immediate change. 

 

The article presents the overall change of Apple's market cap as shares vanished off the market and as EPS went up. EPS is directly related to outstanding shares, just like market cap is. 

 

AAPL bears are saying the company should be priced low because it isn't growing at a high ratio to itself as fast as it was.

AAPL bulls think the company is worth more because its fundamentals are solid and its severely undervalued by people who don't understand it.

 

Capital return addresses both. If the stock didn't trend upward, it would be surprising.  

post #11 of 135
Quote:
Originally Posted by Russell View Post

On March 19, 2012 AAPL closed at $601. Later that day Apple first announced they were going to initiate dividends and buybacks.



Like clockwork, naive fanbois convinced each other it was a great idea because fewer shares on the market will make the stock price go up.

It didn't happen.



Just 2 years later, April 23, 2014, AAPL closed at $524. Down 14%.

During the same time, AMZN went from $185 to $324. Up 75%.



Now Apple is multiplying available shares.



Why the complete turn around? Apple couldn't fool enough people?



As I have said before, just because a company makes a lot of profit, it doesn't mean their stock will go up.



Ya, you do say that....
post #12 of 135
Quote:
Originally Posted by Russell View Post
 

On March 19, 2012 AAPL closed at $601. Later that day Apple first announced they were going to initiate dividends and buybacks.

Like clockwork, naive fanbois convinced each other it was a great idea because fewer shares on the market will make the stock price go up.
It didn't happen.

Just 2 years later, April 23, 2014, AAPL closed at $524. Down 14%.
During the same time, AMZN went from $185 to $324. Up 75%.

Now Apple is multiplying available shares.

Why the complete turn around? Apple couldn't fool enough people?

As I have said before, just because a company makes a lot of profit, it doesn't mean their stock will go up.

"As I have said before, just because a company makes a lot of profit, it doesn't mean their stock will go up."

 

This is the sort of thing I can't rationalize about the stock market.  It seems to me as though a profitable company should reward shareholders more than a company that barely makes any profits.  That should be the true purpose of investing into a solid company.  What I'm seeing is investors simply gambling with things like momentum and putting money into companies that will never make profits because their financial models aren't sound.  When I first got into the stock market, I thought it was a rational thing.  Now I find out it isn't and I can't quite wrap my head around it.  Companies like Facebook, Twitter, LinkedIn, Pandora, I would think should be practically worthless, yet there they are turning investors into millionaires while Apple shareholders have to watch Apple's share price sink despite the company making billions of dollars a week.  It just feels as though there's some sort of disconnect of company wealth and shareholder wealth that shouldn't possibly exist.  Basing a company's value on future potential doesn't make any sort of sense to me.  Something like that doesn't exist in my everyday world.  I don't live in the world of venture capitalists, so I couldn't possibly understand.

post #13 of 135
Quote:
Originally Posted by Corrections View Post
 

 

You are looking at whether the news of Apple's capital return program created some immediate change. 

 

The article presents the overall change of Apple's market cap as shares vanished off the market and as EPS went up. EPS is directly related to outstanding shares, just like market cap is. 

 

AAPL bears are saying the company should be priced low because it isn't growing at a high ratio to itself as fast as it was.

AAPL bulls think the company is worth more because its fundamentals are solid and its severely undervalued by people who don't understand it.

 

Capital return addresses both. If the stock didn't trend upward, it would be surprising.  

It won't surprise me if it doesn't trend upward until after the summer.  :-)

post #14 of 135
Quote:
Originally Posted by Corrections View Post
 

 

You are looking at whether the news of Apple's capital return program created some immediate change. 

 

The article presents the overall change of Apple's market cap as shares vanished off the market and as EPS went up. EPS is directly related to outstanding shares, just like market cap is. 

 

AAPL bears are saying the company should be priced low because it isn't growing at a high ratio to itself as fast as it was.

AAPL bulls think the company is worth more because its fundamentals are solid and its severely undervalued by people who don't understand it.

 

Capital return addresses both. If the stock didn't trend upward, it would be surprising.  

I don't understand why rapid growth makes a company so valuable to investors.  I would think that slow and steady growth with a long range outlook would be more valuable.  Companies that quickly spurt can burn out just as fast for so many reasons.  Multiple companies in the same market, each trying to spurt, would only seem to create a saturation point a lot faster.  Once that market is saturated, then bye-bye to rapid growth.  At that point, then suddenly those companies are no longer as valuable to investors as they were?  How does that make sense?  My simple mind just doesn't comprehend that type of reasoning.  Whether Apple grows a lot or not, the company is generating absolutely huge amounts of money, so why should it become less valuable to investors than some high growth company that's barely making any profits?  Gambling on growth just seems stupid.  I can't comprehend why Priceline stock is worth $1200 a share and Apple shares aren't even worth half of that.

post #15 of 135
Quote:
Originally Posted by Constable Odo View Post

"As I have said before, just because a company makes a lot of profit, it doesn't mean their stock will go up."

This is the sort of thing I can't rationalize about the stock market.  It seems to me as though a profitable company should reward shareholders more than a company that barely makes any profits.  That should be the true purpose of investing into a solid company.  What I'm seeing is investors simply gambling with things like momentum and putting money into companies that will never make profits because their financial models aren't sound.  When I first got into the stock market, I thought it was a rational thing.  Now I find out it isn't and I can't quite wrap my head around it.  Companies like Facebook, Twitter, LinkedIn, Pandora, I would think should be practically worthless, yet there they are turning investors into millionaires while Apple shareholders have to watch Apple's share price sink despite the company making billions of dollars a week.  It just feels as though there's some sort of disconnect of company wealth and shareholder wealth that shouldn't possibly exist.  Basing a company's value on future potential doesn't make any sort of sense to me.  Something like that doesn't exist in my everyday world.  I don't live in the world of venture capitalists, so I couldn't possibly understand.

I too find it s mystery why people are shoving money to companies that have great revenues but miserable profits and losses.

Perhaps they can see something I don't in this mystery thing called future growth.

This mystery future growth thing gives a blind eye to the years of miserable or minimal profits and yet reward the companies with huge increase in the price of their share.

Perhaps making money today is not as good as making some time in the far off future.

Perhaps I don't have to eat to day because my future eating will compensate what I didn't eat today.

Yes that's about right, future intake of food will compensate what I didn't ingest today.
post #16 of 135
Quote:
Originally Posted by Russell View Post
 

On March 19, 2012 AAPL closed at $601. Later that day Apple first announced they were going to initiate dividends and buybacks.

Like clockwork, naive fanbois convinced each other it was a great idea because fewer shares on the market will make the stock price go up.
It didn't happen.

Just 2 years later, April 23, 2014, AAPL closed at $524. Down 14%.
During the same time, AMZN went from $185 to $324. Up 75%.

Now Apple is multiplying available shares.

Why the complete turn around? Apple couldn't fool enough people?

As I have said before, just because a company makes a lot of profit, it doesn't mean their stock will go up.

 

Fair comment. But Amazon makes no profit (essentially zero - the P/E is 514). And, for some inexplicable reason, the stock fell 10% just today.

 

Apple has been making money like it's going out of style - for several years now - and Wall Street thinks it's little more than trash. After a long time, the stock is up about 9%. And P/E is 14.

 

You're right - just because Apple makes money doesn't mean that its stock will go up, or that it will reflect its value.

 

I certainly cannot understand how anyone with a lick of sense is buying Amazon shares. I just can't.

post #17 of 135
Quote:
Originally Posted by Constable Odo View Post

I would think that slow and steady growth with a long range outlook would be more valuable.

WHAT?! All you've been doing is bitching about the growth not being fast and steady enough.
Edited by SolipsismX - 4/26/14 at 7:37am

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post #18 of 135
The stock market is a herd animal. Of course, any herd can be "driven", assuming one has enough leverage and an absence of morals. In AAPL's case, the herd was "driven" away from ownership by an avalanche of false information. And in the ensuing stampede, a lot of people were hoodwinked into taking a loss - to the benefit of those who were then able to buy in at fire sale prices.

Enter Apple, and it's decision to buy back its shares.in huge amounts. Suddenly, the ability to panic the herd was taken away. How? As the herd began to sell, Apple bought. And bought. And bought. But here's the kicker: Apple has so much income that it can literally buy indefinitely, and will do so long as the price is depressed below fair value. And the long term investor wins because Apple is simultaneously cutting dividends, and the reduction in share count means the dividends will be increased, since there are less shares to divide the profit into.

The buybacks are a genius move by Apple that is slowly but surely rebuilding the value of Apple stock.
post #19 of 135
Daniel's articles are usually putting another light ion facts n a very favorable apple-direction. Sometimes it's actually interesting, sometimes it's a far stretch.... But in this case he's just plain wrong.

Whatever share apple has bought STILL counts as "on the market" and still counts as part of the market cap. Sorry Daniel. Put that article down. It's really misleading.
post #20 of 135
Amazon destroys traditional markets (like Walmart does) but makes minuscule profits in the process.

Quarter just ended, $20 billion gross sales netted only $180 million in profit.

Explain to me how this makes bezos some kind of genius? If he was running any other business he'd be out on his ... ear.

In the short term, customers save $2 on a $10 item.

In the long term, employment and variety / choice are reduced while society as a whole suffers to benefit a very small number of people.

"maximizing shareholder value" is code for corporate psychopathy.

People are sheep.
Edited by vaporland - 4/26/14 at 3:07am
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post #21 of 135
Quote:
Originally Posted by plovell View Post

I certainly cannot understand how anyone with a lick of sense is buying Amazon shares. I just can't.

Tesla's the same, even the CEO is saying WTF, we're valued at over $24b but make almost no profit:

http://money.cnn.com/2013/10/25/investing/tesla-netflix-momentum-stocks/

There seems to be a hot potato syndrome with some stocks where the people invested in it know that the current valuation at least is all hype but they keep pushing the hype as long as people will keep buying into it. If the hype doesn't ring true, the one left with the potato is the sucker.

All values are based on perception of worth, partly based on market demand. With short-term tangible goods, it's harder to manipulate. With stock price based on promises of future growth, a company can drop by billions in a very short time:

http://www.businessweek.com/articles/2013-10-03/eike-batista-how-brazils-richest-man-lost-34-dot-5-billion

"OGX announced it was aiming for more than 1 million barrels a day by 2019—which would have amounted to almost half of Brazil’s total output. They announced potential resources of 4.8 billion barrels, more than a third of Petrobras’s proven reserves. OGX had yet to drill a single well.

In public, Eike Batista all but promised he would be the world’s richest man by 2015 and be worth $100 billion by 2020. At the end of April 2012, Batista would tell Bloomberg TV that his companies were sitting on $1.5 trillion of “underlying assets.” That amounts to the entire estimated value of all the mineral assets in Mongolia.

On June 26, OGX announced that well pressure at the Tubarão Azul field had faded and that “ideal” production at its first two wells would be about 5,000 barrels a day—75 percent less than expected. It was a number that could not be spun. Shares fell about 45 percent in two days, and OGX bonds began a free fall as analysts cut ratings."



These buybacks and earnings are good for this quarter for Apple but if earnings slip in future, traders can easily wipe the gains out nullifying the whole buyback just like they've done in the past. Apple should avoid getting too involved in these silly finance games trying to make gamblers happy because the greed is unquenchable. The current buybacks are a good plan as they have so much cash but a solid war chest is a good thing to have too as it allows them to invest for growth.
post #22 of 135
Quote:
Originally Posted by vaporland View Post

Amazon destroys traditional markets (like Walmart does) but makes minuscule profits in the process.

Quarter just ended, $20 billion gross sales netted only $180 million in profit.

Explain to me how this makes bezos some kind of genius? If he was running any other business he'd be out on his ... ear.

In the short term, customers save $2 on a $10 item.

In the long term, employment and variety / choice are reduced while society as a whole suffers to benefit a very small number of people.

"maximizing shareholder value" is code for corporate psychopathy.

People are sheep.
And yet the financial world (and tech media) keep making excuses for Amazon. It's always they're investing for the future, wait 10 years (which they said 10 years ago). blah blah blah. As if Amazon will be able to magically turn on a profit spigot one day. Jeff Bezos might not care what happens with Amazon stock but I'm sure the employees do.as the pay at Amazon isn't that great and I'm sure a lot employees are counting on stock options.
post #23 of 135
Quote:
Originally Posted by Constable Odo View Post

 I can't comprehend why Priceline stock is worth $1200 a share and Apple shares aren't even worth half of that.

If you're just looking at absolute stock prices, you have no business being in -- let alone commenting on -- the stock market.
post #24 of 135
As a long-term Apple investor, I wish they had focused 100% of their capital returns to stock buybacks and provided NO dividend at all, until they had boughten backed $100B or so of their stock. THEN they could give a very hefty dividend that is paid out to a lower number of shares.
post #25 of 135
Quote:
Originally Posted by shahhet2 View Post
 

Somebody has to be stupid if they think all market cap raise is due to buyback. Seriously AI?

Out of that 100B,40B came in just a day of result, Where they can't even trade in that lockout time.

Maybe you didn't read the article.  I'll quote it for you:

 

"However, in addition to the number of shares changing due to Apple's buybacks, the company is also reporting improved fundamentals."

 

Basically AI is pointing out how impressive it is that the Market Cap has grown so much despite the large buybacks which tend to shrink market cap.  

post #26 of 135
Quote:
Originally Posted by vaporland View Post

Amazon destroys traditional markets (like Walmart does) but makes minuscule profits in the process.

Quarter just ended, $20 billion gross sales netted only $180 million in profit.

Explain to me how this makes bezos some kind of genius? If he was running any other business he'd be out on his ... ear.

In the short term, customers save $2 on a $10 item.

In the long term, employment and variety / choice are reduced while society as a whole suffers to benefit a very small number of people.

"maximizing shareholder value" is code for corporate psychopathy.

People are sheep.

$180 Million on $20 Bill?  Ouch....  I can get better ROI with a standard passbook savings account.  That's chump change.

 

What Amazon is doing is leveraging their infrastructure to help retail stores, but I don't know how they can be trading at a 570 P/E ratio and get on conference calls with a straight face.   I buy lots of things from Amazon when I can't buy locally or if I see it at a higher discount, it does save me travel time and gas money overall.  So far, I've had great service and most of the products were bought were from small retail stores that just sell through them, so I don't think they are bad for retailers per se, just SOME retail stores that don't sell through them is who they are hurting.  The problem I see about Amazon is trying convince people it's a HYPER GROWTH stock that warrants trading at such high P/E ratios.   No, i don't buy Kindle and I think eventually Kindle will fail.  I think their streaming service is OK, it does't have the best and most complete catalog of content, but it's just included in the yearly price that I get cheaper and faster package delivery service since I make about 20 to 30 purchases a year through them, the streaming content for me was an added bonus, plus I paid at the older cheaper yearly fee.  I don't know if renewing will be as advantageous but since I buy a lot, I probably will renew in about a year.

 

But getting back to it being a good stock pick?  I wouldn't touch that stock with a 10 foot pole as I can see that this stock may come back into reality mode and maybe go where it SHOULD be, which is a penny stock.   That's the type of Net Margins they are making and I think this stock, and others like it should be penny stocks.  Maybe people will realize that Facebook and Twitter should actually be penny stocks.

post #27 of 135
Quote:
Originally Posted by Savio View Post

As a long-term Apple investor, I wish they had focused 100% of their capital returns to stock buybacks and provided NO dividend at all, until they had boughten backed $100B or so of their stock. THEN they could give a very hefty dividend that is paid out to a lower number of shares.

I personally think they need to spend money on getting their production so they don't have product supply issues, for them to start entering in new product markets like the SmartTV and maybe spending more money on advertising the Mac product line which seems to be neglected.  Why spend money advertising products that already sell?  I mean, everyone knows about the iPhone and they sell as many as they make so why keep on adversing it unless it's a new product announcement?  I think if they want to attract more Windows switchers, they should get new, updated and relevant Mac vs PC ads going.  If done tastefully, that will drive more business to the Macs and since their average selling price is higher, the average Mac sale is about 3x of the price of an average iPad sale.  yeah, they should increase the dividends, which they did, but I'm still getting my head wrapped around spending cash to buyback shares and then turn around and issue more shares.  I'm trying to find the logic in that. I think 7 to 1 stock split was a little aggressive,  I would have done maybe a 3-1 split instead as to not dilute the stock so much at one time.

post #28 of 135
Quote:
Originally Posted by drblank View Post
 

I personally think they need to spend money on getting their production so they don't have product supply issues, for them to start entering in new product markets like the SmartTV and maybe spending more money on advertising the Mac product line which seems to be neglected.  Why spend money advertising products that already sell?  I mean, everyone knows about the iPhone and they sell as many as they make so why keep on adversing it unless it's a new product announcement?  I think if they want to attract more Windows switchers, they should get new, updated and relevant Mac vs PC ads going.  If done tastefully, that will drive more business to the Macs and since their average selling price is higher, the average Mac sale is about 3x of the price of an average iPad sale.  yeah, they should increase the dividends, which they did, but I'm still getting my head wrapped around spending cash to buyback shares and then turn around and issue more shares.  I'm trying to find the logic in that. I think 7 to 1 stock split was a little aggressive,  I would have done maybe a 3-1 split instead as to not dilute the stock so much at one time.

1.  There is no money in televisions.  

2.  Advertising doesn't always help.  Just ask Microsoft who has been unrelentlessly advertising their failed tablet lines.  Once your brand is established and trusted, there is little benefit to continued advertising.  

3.  Production problems are very temporary and don't tend to cause long term revenue problems.  In fact some would argue that Apple's image is helped by the long times and wait times making the news.  

4.  This is a big one:  Apple is NOT issuing more stock and a stock split does NOT dilute their shares.  You have a very basic misunderstanding of what a stock split is.  Think of it as changing a $100 bill into 5 $20 bills.  Did you "issue more money" or dilute the money supply by doing that?  No.  Its a very similar concept.  I chose this example as I hope it makes sense to someone unfamiliar with stocks in general.  

post #29 of 135
Quote:
Originally Posted by Savio View Post
 

1.  There is no money in televisions.  

2.  Advertising doesn't always help.  Just ask Microsoft who has been unrelentlessly advertising their failed tablet lines.  Once your brand is established and trusted, there is little benefit to continued advertising.  

3.  Production problems are very temporary and don't tend to cause long term revenue problems.  In fact some would argue that Apple's image is helped by the long times and wait times making the news.  

4.  This is a big one:  Apple is NOT issuing more stock and a stock split does NOT dilute their shares.  You have a very basic misunderstanding of what a stock split is.  Think of it as changing a $100 bill into 5 $20 bills.  Did you "issue more money" or dilute the money supply by doing that?  No.  Its a very similar concept.  I chose this example as I hope it makes sense to someone unfamiliar with stocks in general.  

 

1.  I disagree.  The cheaper, low budget dumb TVs don't make any money, but I thing that sweetspot that Apple would go after would.  Apple knows how to streamline the electronics inside and I know they could figure out how to do it where they could make money.   It's like any technology industry.  Only some smartphone mfg make money, but most of them don't.  That's why Apple only goes after a certain price range  and market segment of the smartphone industry.  Same rules apply in TVs.

 

2.  Advertising does help.  It helped Apple with the Switcher campaign and since Windows XP is now FINALLY DEAD, it's a great time to advertise Macs.  You wouldn't believe how many people bought certain brands from advertising.  It does help.  If Microsoft didn't advertise, they wouldn't have sold as many as they did.  Instead of selling none, they sold at least a couple of hundred thousand to a million units.  They just were too late to the party.  :-)

 

3.  Meeting demand is almost as bad as not having demand.  It's only better because people actually want your product, but they can fix it by spreading out product releases and getting production levels up as they increase the markets they sell into and introducing new lines that will attract new customers.  They have an issue.  If the company wants to get 15 to 20% growth rate, then  they HAVE to increase production to over 200 Million phones a year in the next 12 months.  Apple has a lot of demand when they have a new product, but they can't make them fast enough.  That's a production issue, not enough assembly places.  It takes time to build a new facility, etc., but the demand is still there.

 

4. Yeah, stocks splits dilute.  Think of this way.  You have a piece of paper and it's worth $100, because they issued more shares through a stock split, that piece of paper isn't worth $100, it's only worth 1/7th of $100 in the case of a 7 to 1 split.  Now, the other way they can dilute the shares is by issuing more shares and selling through another Public Offering, it's not commonly done, but when they do that, the existing shares get diluted and the price goes down.  So it doesn't matter HOW they issue more shares, the concept of devaluing the share by issuing more shares is what's called dilution.  Sorry, but I'v

Quote:
Originally Posted by Savio View Post

1.  There is no money in televisions.  
2.  Advertising doesn't always help.  Just ask Microsoft who has been unrelentlessly advertising their failed tablet lines.  Once your brand is established and trusted, there is little benefit to continued advertising.  
3.  Production problems are very temporary and don't tend to cause long term revenue problems.  In fact some would argue that Apple's image is helped by the long times and wait times making the news.  
4.  This is a big one:  Apple is NOT issuing more stock and a stock split does NOT dilute their shares.  You have a very basic misunderstanding of what a stock split is.  Think of it as changing a $100 bill into 5 $20 bills.  Did you "issue more money" or dilute the money supply by doing that?  No.  Its a very similar concept.  I chose this example as I hope it makes sense to someone unfamiliar with stocks in general.  

SmartTV is a segment that does make money, it's the cheap dumb TVs that don't.

Advertising always help, it helped in the switcher campaign and because XP is dead, this would be a good time to run some more ads that are catering to those that might be buying a new computer.

If Apple is going to enter another product category in smart phones, and they want to increase their revenues and net profit, they have to increase production to reflect this growth. They can't produce enough product at this time when they only have 4 inch refresh, and this year they are going to announce a ~5 inch model that's going to attract Android users to Apple. They need to ramp up production to meet this increase demand and to show the analysts that they can sell more than 60 Million phones in a quarter to show they are still growing.

Any time a company issues more shares, that's dilution. They can do it a variety of ways. But if they issue more stock, the value per share drops, they just did it with a stock split to give you more shares so your position would be of equal value, but the share price does drop per share as a result. Stock prices tend to not move up as fast if the company has too many shares outstanding.
post #30 of 135

*sigh* 

If you still  think that stock splits "dilute" the shares, then I can't help you.  But I will try anyway.   

 

You said:

"I'm still getting my head wrapped around spending cash to buyback shares and then turn around and issue more shares"

 

Apple is NOT issuing any shares (and hasn't for a while) and the buyback and stock split are completely independent of each other and do not affect each other in any way. 

 

Please review: http://en.wikipedia.org/wiki/Stock_dilution

Here are some tidbits from the article:

1.  "This dilution can shift fundamental positions of the stock such as ownership percentage, voting control, earnings per share, and the value of individual shares"  and BTW, a stock split does NOT change any of these fundamental positions.  

2.  "Stock dilution is an economic phenomenon resulting from the issue of additional common shares by a company."

 

And here is another article for your education: http://en.wikipedia.org/wiki/Stock_split

The takeaway is in the very first sentence: " stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur""

post #31 of 135
Quote:
Originally Posted by Savio View Post
 

*sigh* 

If you still  think that stock splits "dilute" the shares, then I can't help you.  But I will try anyway.   

 

You said:

"I'm still getting my head wrapped around spending cash to buyback shares and then turn around and issue more shares"

 

Apple is NOT issuing any shares (and hasn't for a while) and the buyback and stock split are completely independent of each other and do not affect each other in any way. 

 

Please review: http://en.wikipedia.org/wiki/Stock_dilution

Here are some tidbits from the article:

1.  "This dilution can shift fundamental positions of the stock such as ownership percentage, voting control, earnings per share, and the value of individual shares"  and BTW, a stock split does NOT change any of these fundamental positions.  

2.  "Stock dilution is an economic phenomenon resulting from the issue of additional common shares by a company."

 

And here is another article for your education: http://en.wikipedia.org/wiki/Stock_split

The takeaway is in the very first sentence: " stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur""

When there is a stock split, more shares are issued, the share price goes down by a rate determined by the split adjustment, the Earnings per Share goes down because there is more shares outstanding and the same earnings, the earnings haven't changed, but the number of shares has.  Market capitalization stays the same because they are just multiplying more shares by a smaller number, but they both were effected equally in opposite directions.     But the shares outstanding are increasing which is a form of dilution.  I think you are thinking of the dilutions of one's personal ownership, which is true.    the stock split won't change one's dilution of ownership, but I wasn't talking about that type of dilution.  I was speaking more of a tremendous amount of shares coming on the market that's going to change the stock behavior.  You aren't going to see lots of HUGE swings in the stock price because of it. At least not this time. The number of shares is diluted to the point where it's now going to behave more like Microsoft, unless Apple goes back into hyper growth mode.  I would expect the stock behave more like a snail after this stock split.

 

BEFORE the stock split, owning 100 shares will have a larger percentage of ownership than if you bought 100 shares AFTER the stock split.  


Edited by drblank - 4/26/14 at 6:22pm
post #32 of 135
Quote:
Originally Posted by drblank View Post
 

When there is a stock split, more shares are issued, the share price goes down by a rate determined by the split adjustment, the Earnings per Share goes down because there is more shares outstanding and the same earnings, the earnings haven't changed, but the number of shares has.  Market capitalization stays the same because they are just multiplying more shares by a smaller number, but they both were effected equally in opposite directions.     But the shares outstanding are increasing which is a form of dilution.  I think you are thinking of the dilutions of one's personal ownership, which is true.    the stock split won't change one's dilution of ownership, but I wasn't talking about that type of dilution.  I was speaking more of a tremendous amount of shares coming on the market that's going to change the stock behavior.  You aren't going to see lots of HUGE swings in the stock price because of it. At least not this time. The number of shares is diluted to the point where it's now going to behave more like Microsoft, unless Apple goes back into hyper growth mode.  I would expect the stock behave more like a snail after this stock split.

 

BEFORE the stock split, owning 100 shares will have a larger percentage of ownership than if you bought 100 shares AFTER the stock split.  

I was using the definition of dilution and stock splits that are the actual definitions as I linked in my post.  I'm not sure what definition you are using.  Again, a stock split is NOT an issuance of stock and does NOT dilute the stock.  

 

You said, " I think you are thinking of the dilutions of one's personal ownership, which is true"

 

Again, its not about what I am thinking.  Its about what the reality is and the real definitions of the words.  

 

You may not have read the article I posted so I'll repost them:

http://en.wikipedia.org/wiki/Stock_dilution

http://en.wikipedia.org/wiki/Stock_split

 

Quoted from the 2nd one:  "stock split....increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur."

 

Dilution is when new stock is issued that didn't previously exist.  NOT when previously existing stock is split into smaller pieces.  

 

Its like the difference between printing new money (causing inflation) or changing a $100 for $20s (which does NOT cause inflation).  

post #33 of 135
Quote:
Originally Posted by Savio View Post
 

I was using the definition of dilution and stock splits that are the actual definitions as I linked in my post.  I'm not sure what definition you are using.  Again, a stock split is NOT an issuance of stock and does NOT dilute the stock.  

 

You said, " I think you are thinking of the dilutions of one's personal ownership, which is true"

 

Again, its not about what I am thinking.  Its about what the reality is and the real definitions of the words.  

 

You may not have read the article I posted so I'll repost them:

http://en.wikipedia.org/wiki/Stock_dilution

http://en.wikipedia.org/wiki/Stock_split

 

Quoted from the 2nd one:  "stock split....increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur."

 

Dilution is when new stock is issued that didn't previously exist.  NOT when previously existing stock is split into smaller pieces.  

 

Its like the difference between printing new money (causing inflation) or changing a $100 for $20s (which does NOT cause inflation).  

I'm just looking at the number of shares outstanding and why Apple would buy HUGE amounts of stock, which effectively removes shares from the market (outstanding) and then in June they are going to perform the stock split.  BTW, I have NEVER seen or can't remember at any time that a company announced a stock split and bought up large chunks of stocks just prior and right after the announcement before the stock split takes place.  That's why I'm wondering why they would effectively waste BILLIONS of money buying stock and then issue a massive stock split?   They don't have that much of their cash in the US, most of their money (to my knowledge) is in Ireland.

 

How many shares does Apple have now?  A little less than 900 Million shares outstanding.  Before they started buying stocks, at one time about a year ago they had as many as 990 Million shares outstanding.

 

if Apple doesn't buy anymore shares and they leave this alone, how many shares outstanding will there be AFTER the Stock actually splits?  Approximately?    

 

Just answer this last question.   That's all I'm looking at.

post #34 of 135
Quote:
Originally Posted by drblank View Post

That's why I'm wondering why they would effectively waste BILLIONS of money buying stock and then issue a massive stock split?

I don't understand the point of your question. Nothing about those two things are contradictory or mutually exclusive.
Quote:
How many shares does Apple have now?  A little less than 900 Million shares outstanding.  Before they started buying stocks, at one time about a year ago they had as many as 990 Million shares outstanding.

if Apple doesn't buy anymore shares and they leave this alone, how many shares outstanding will there be AFTER the Stock actually splits?  Approximately?

Why can't you answer it? If, for example, a share of a $200 stock has 1,000,000 shares outstanding it has a $200 million market cap. If it gets a 2:1 split it's now a $100 stock with 2,000,000 shares outstanding and still a $200 million market cap. A 7:1 split means you simply multiply the number of shares by 7. In and of itself the market cap remains exactly the same with a split.
Edited by SolipsismX - 4/26/14 at 11:29pm

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post #35 of 135
Quote:
Originally Posted by drblank View Post

I'm just looking at the number of shares outstanding and why Apple would buy HUGE amounts of stock, which effectively removes shares from the market (outstanding) and then in June they are going to perform the stock split.  BTW, I have NEVER seen or can't remember at any time that a company announced a stock split and bought up large chunks of stocks just prior and right after the announcement before the stock split takes place.  That's why I'm wondering why they would effectively waste BILLIONS of money buying stock and then issue a massive stock split?   They don't have that much of their cash in the US, most of their money (to my knowledge) is in Ireland.

How many shares does Apple have now?  A little less than 900 Million shares outstanding.  Before they started buying stocks, at one time about a year ago they had as many as 990 Million shares outstanding.

if Apple doesn't buy anymore shares and they leave this alone, how many shares outstanding will there be AFTER the Stock actually splits?  Approximately?    

Just answer this last question.   That's all I'm looking at.

\facepalm

I give up.
post #36 of 135
Quote:
Originally Posted by SolipsismX View Post


I don't understand the point of your question. Nothing about those two things are contradictory or mutually exclusive.
Why can't you answer it? If, for example, a share of a $200 stock has 1,000,000 shares outstanding it has a $200 million market cap. If it get a 2:1 split it's now a $100 stock with 2,000,000 shares outstanding and still a $200 market cap. A 7:1 split means you simply multiply the number of shares by 7. In and of itself the market cap remains exactly the same with a split.

I know the market cap stays the same, I wasn't speaking of the market cap.  The point is Apple's spending BILLIONS of dollars to effectively REMOVE stock and then turn around and increase the shares outstanding by a fact of 7, but they lost money that is basically dumped and not recouped.   They're not recouping that money they just dropped in purchasing tens of millions of shares when they increase the number of shares by many billion.  It just doesn't make sense.  

 

I already know they are going to have 7x the outstanding shares in June after they complete the stock split, but why are they buying shares back right before that and spending BILLIONS in doing so?  They aren't going to get that money back when they split the stock.

post #37 of 135
Quote:
Originally Posted by Savio View Post


\facepalm

I give up.

So you can't explain why Apple would spend billions of dollars effectively removing stock months before they increase the number of shares outstanding after they split the stock?  

post #38 of 135
Quote:
Originally Posted by drblank View Post

I know the market cap stays the same, I wasn't speaking of the market cap.  The point is Apple's spending BILLIONS of dollars to effectively REMOVE stock and then turn around and increase the shares outstanding by a fact of 7, but they lost money that is basically dumped and not recouped.   They're not recouping that money they just dropped in purchasing tens of millions of shares when they increase the number of shares by many billion.  It just doesn't make sense.  

I already know they are going to have 7x the outstanding shares in June after they complete the stock split, but why are they buying shares back right before that and spending BILLIONS in doing so?  They aren't going to get that money back when they split the stock.

I think I know what your issue is. You think the reason for a share repurchase is to reduce the number of active shares. It's not. That's just an effect of the purchase. The point is to reduce the float and based on a given market cap the buyback will have the exact same effect whether is't 7x as many shares at 1/7th the valuation as a month prior because those numbers are all connected to the market cap. I honestly don't know why you're even asking about this.

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post #39 of 135
Quote:
Originally Posted by drblank View Post

So you can't explain why Apple would spend billions of dollars effectively removing stock months before they increase the number of shares outstanding after they split the stock?  

It looks like he's explained many, many times.

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

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post #40 of 135
Quote:
Originally Posted by drblank View Post

So you can't explain why Apple would spend billions of dollars effectively removing stock months before they increase the number of shares outstanding after they split the stock?  
The point of buying back stock isn't to have less stock, it's to increase the value of the remaining stock going forward, which should return more value to existing shareholders if/when the stock price rises.

Splitting it splits the value of each individual share to make it more affordable to buy a piece of Apple for low volume stock traders, but doesn't have any effect on the total value (price x quantity) of the stock held by existing shareholders.

The goals of buying back and splitting stock do not conflict.

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