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

Posted:
in AAPL Investors edited January 2014
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.
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Comments

  • Reply 1 of 81
    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.
  • Reply 2 of 81
    cykzcykz Posts: 81member
    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...
  • Reply 3 of 81
    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?
  • Reply 4 of 81
    jkichlinejkichline Posts: 1,302member


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

  • Reply 5 of 81
    jragostajragosta Posts: 10,473member
    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 <a href="http://appleinsider.com/articles/13/02/07/hedge-fund-manager-david-einhorn-sues-apple-over-137b-cash-hoard">suing Apple</a> in an attempt to have the company distribute preferred stock to shareholders.

    <div align="center"><img src="http://photos.appleinsidercdn.com/cash-130207.jpg" alt="Cash"><br/><span class="minor2">Apple added $38 billion in cash in fiscal 2011, but $16 billion in just the last quarter. Chart by <a href="http://www.asymco.com/2012/01/24/apple-added-38-billion-in-cash-last-year/"><em>Asymco</em></a>.</span></div>

    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.<q>Brian White projects that Apple will have nearly $241 billion in cash by the end of fiscal 2015.</q>

    "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.
  • Reply 6 of 81
    wozwozwozwoz Posts: 204member
    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.
  • Reply 7 of 81
    Debt: the slippery road to being owned by Wall street
  • Reply 8 of 81


    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.


     


     

  • Reply 9 of 81
    mvigodmvigod Posts: 172member
    Apple knows it needs all that money to survive the coming competition and margin compression
  • Reply 10 of 81

    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..

  • Reply 11 of 81


    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...

  • Reply 12 of 81
    jragosta wrote: »
    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?
  • Reply 13 of 81
    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
  • Reply 14 of 81
    I see it as an opportunity to for Einhorn to seize Apple cash for his rich customers from share holders such as myself.
  • Reply 15 of 81
    mvigod wrote: »
    Apple knows it needs all that money to survive the coming competition and margin compression

    That's absurd.
  • Reply 16 of 81


    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.

  • Reply 17 of 81


    You see it correctly!

  • Reply 18 of 81
    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.
  • Reply 19 of 81
    Also, It would be nice if Apple insider reported another point of view other than vulture capitalists.
  • Reply 20 of 81
    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.
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