$AAPL shares regain highs from early 2013; many Apple analysts' targets now underwater

Posted:
in AAPL Investors edited January 2014
Apple's stock has returned to highs not seen since the beginning of the year, closing today above the price targets of a number of financial analysts and increasingly challenging the value of vast new buyback plans advocated by celebrity investor Carl Icahn.

AAPL stock
Source: Google Finance


With two full days of market trading left before Apple announces its September quarter earnings next Monday after the market closes, Icahn has stepped up his efforts to push Apple to take on billions of debt via bond sales in order to buy up its own outstanding shares.

Such a buyback would allow the company to incrementally pay back the debt over the next decade from its earnings, while allowing it to report higher earnings per share because there would be fewer outstanding shares. He predicts this would help boost Apple's share price faster than otherwise.

Big Buybacks

The company has already been doing this, having announced a $60 billion buyback plan earlier this year. Apple floated bonds in April and quickly found more than enough buyers willing to give the company money at very low interest in exchange for long term, low risk paper backed by the company's stellar credit from market leading performance and vast cash holdings.

At the beginning of the September quarter, Apple had $44 billion left of its buyback budget, which wasn't scheduled to be spent before 2015 according to the terms of the buyback plan. Buying back shares under the plan is also optional; Apple could decide to stop buying shares and simply let the plan expire.

However, given that Apple splurged a third of its allocated share buyback funds in the June quarter to buy up 36 million shares at an average price of $444, it appears likely that it has continued to aggressively take advantage of its acutely low stock price over the past three months to buy up shares.

The September quarter began with AAPL stock at $409 and continued below the average share price Apple had been paying to buy up stock in the prior quarter through the final two days of July. Since then, the stock has returned to being above $530, where it started at in the beginning of 2013 albeit well below its high surpassing $700 in September 2012.

Analysts underwater

Apple's stock has gone up so rapidly that a series of analysts have seen their future price targets of the company exceeded, or in some cases, their more pessimistic predictions of doom simply invalidated.

Writing for Fortune, Philip Elmer-DeWitt outlined 18 analysts with Apple price targets that are now underwater (below), a minority of the 48 he tracks, most of whom see Apple going higher (20 have targets at or above $600).



Apple could very likely report another record quarter of buybacks that matches or exceeds the value-performance of the June quarter, easily erasing another 36 million outstanding shares or potentially as many as 100 million shares, were Apple to buy all the stock its current buyback plan allowed at the price levels available in July.

Before retiring any new buybacks, Apple had 908 million shares outstanding, so another quarter of big stock purchases could reduce the company's total shares by 4 percent to as much as 11 percent, resulting in a significant impact on its revenue per share and earnings per share metrics.

Window of opportunity for cheap buybacks closing

The only reason for the company to not have vigorously exercised its buyback program would be if Apple had expected its stock to drop in the future, or if it weren't able to find sufficiently cheap shares to buy.

There's been plenty of opportunity for Apple to buy back its shares at low market rates, evidenced by AAPL shares dropping and staying depressed every time an analyst issued a reduced outlook based on illusory supply checks or the failure of the company to follow the analyst's desired strategies.

On the other hand, there's good reason to believe the company has recognized the current quarter as being as a unique opportunity for buying back shares, one which might not every occur again at today's prices.

In the June quarter, Apple faced reasonable uncertainty about whether its stock price might go down even further in the September quarter. The company knew it wouldn't be introducing any major new products before the end of September, and it had reason to believe that the market might react irrationally to risks inherent in its substantial transition to iOS 7, which it first unveiled in June.

Apple's shares have since gone up dramatically after reaching below $400 in July. Following the release of the record setting iPhone 5s and 5c last month and the announcement of new Macs, new iPads and new software along with the new OS X Mavericks this last week, Apple's shares have appreciated even more. If Apple hasn't already blown its buyback budget, it may have blown its best chance to do so.

On Monday, Apple will outline results that include the blockbuster iPhone launch weekend and its first week of new iPhone sales.
«1

Comments

  • Reply 1 of 38
    danoxdanox Posts: 378member
    No worries, Amazon made no profit new highs tomorrow Ha..Ha..
  • Reply 2 of 38
    rogifanrogifan Posts: 10,669member
    Until Monday when quarterly results don't meet expectations, or even if they do Wall Street will still dump Apple stock afterwards.
  • Reply 3 of 38
    bigpicsbigpics Posts: 1,355member

    Don't go away mad, Carl Icahn.  Just go away and bedevil some other company.



    (And damn, I wish there was some way for Apple to burn his ass on the way out.  Still he's a tricky - and persistent - dick once he sets his sights on something, so this sub-plot will likely have more twists and turns - and maybe many - before it's over....)

  • Reply 4 of 38

    The major reason for the stock drop in the first place was the perception that Apple had lost it's visionary in Jobs and weren't like Google who were out trying to come up with amazing new things.  The best thing Apple could do with it's pile of cash would be to bring Elon Musk in - buy both Tesla and Space-X (he's running out of cash) and let him take over the "visionary" position that's been vacant at the company for 2 years.  Jony then gets to work designing the world's best car and the space technology sets the company up for new horizons.  Do this and the stock will pass Google's current price.

  • Reply 5 of 38
    MacProMacPro Posts: 17,985member
    I have a bridge to sell Ed Zabitsky, he is obviously a very financially astute chap.
  • Reply 6 of 38
    MacProMacPro Posts: 17,985member
    The major reason for the stock drop in the first place was the perception that Apple had lost it's visionary in Jobs and weren't like Google who were out trying to come up with amazing new things.  The best thing Apple could do with it's pile of cash would be to bring Elon Musk in - buy both Tesla and Space-X (he's running out of cash) and let him take over the "visionary" position that's been vacant at the company for 2 years.  Jony then gets to work designing the world's best car and the space technology sets the company up for new horizons.  Do this and the stock will pass Google's current price.

    I have to admit, I can't deny Elon being part of Apple appeals.
  • Reply 7 of 38
    512ke512ke Posts: 781member

    An imaginary conversation between Analysts and Apple

     

    Analysts: iPhones are dead with teens!

     

    Apple: Uh, no.  Apple has more teen users than Android. 

     

    Analysts: The smart phone market is saturated!  There is no more growth!

     

    Apple: Yeah, there is.  We're just taking huge chunks out of Samsung.

     

    Analysts: The 5C is a fail, I tell you, fail fail fail!

     

    Apple: No, the 5C is a giant hit.  The 5S happen to be a monster hit.

     

    Analysts: Well, 9M opening weekend but they're all in the channel!  You lie!

     

    Apple: 5C is #2 phone beating G4 at many major carriers.

     

    Analysts: Well, Apple has lost the ability to innovate!

     

    Apple: Have a nice new Mac Pro.

     

    Analysts: Well, Android is winning the tablet wars!

     

    Apple: Faster, lighter, better, slimmer.  Which tablet do YOU think will win this holiday season?

     

    Analysts: Um... (checks notes) well um... (whisper amongst each other) You know, we ALWAYS SAID Apple would rise again!

     

    Apple: Our stock went down.  We never did.

  • Reply 8 of 38
    Quote:
    Originally Posted by bennettvista View Post

     

    The major reason for the stock drop in the first place was the perception that Apple had lost it's visionary in Jobs and weren't like Google who were out trying to come up with amazing new things.  The best thing Apple could do with it's pile of cash would be to bring Elon Musk in - buy both Tesla and Space-X (he's running out of cash) and let him take over the "visionary" position that's been vacant at the company for 2 years.  Jony then gets to work designing the world's best car and the space technology sets the company up for new horizons.  Do this and the stock will pass Google's current price.


    I agree. Elon is a fantastic visionary person. One of the few every generation has. Tim Cook is a fantastic CEO and a great supply chain manager but as a visionary and event spokesman, he's a dud. They would have to give Elon the reigns though and that would be tough to do. Does Apple need to do this to keep being successful? No. I think it would be a great match though.

  • Reply 9 of 38
    Not sure why apple insider pesters apple about not having bought stocks every time their stocks rises. They've made more money than they could have ever hoped, and have succeeded many, many times over on the fiduciary end.. Why keep coaching them on how to be a more successful company? Do that for Microsoft. Instead, you should be taking pointers from apple, they've proven themselves as business owners. Most of your hot stock tips are made in hindsight. no matter how much money they make. They always could have been bigger and richer.
  • Reply 10 of 38
    irelandireland Posts: 17,547member
    Let's not get Elon in. He's doing his thing, Apple's doing there's.
  • Reply 11 of 38
    Anything published that has material from these "analysts" should be filed under the fiction section. I can get better forecasting from rolling dice.
  • Reply 12 of 38
    I would fire Ed Zabitsky on the spot.
  • Reply 13 of 38
    hydrhydr Posts: 146member
    That would cost apple like $40billion, but most of that could be converted into AAPL shares for Musk.
    But he us running out of money, apple is not.. O we need him? :)
  • Reply 14 of 38

    The truth is Apple needs a kick up the ass, needs to take a risk and be bold.  The mac, the iPod, the phone/tablet have been invented.. what are you going to do now?  keep trimming a few millimeters here and there?  an extra hour of battery life, new colors.. a watch, maybe improve the TV experience?  Boring... people need to come into work at the Spaceship campus and feel like they are helping to change the world, heading for new horizons...  Apple is going to need a visionary sooner or later.  Someone to see what's around the corner.  A guy like Elon is a visionary, but he doesn't know how to run a profitable company.  He needs a guy like Tim to keep the whole thing working.  Jony needs bigger challenges so do Craig and the others...

  • Reply 15 of 38
    jungmarkjungmark Posts: 6,647member
    The major reason for the stock drop in the first place was the perception that Apple had lost it's visionary in Jobs and weren't like Google who were out trying to come up with amazing new things.  The best thing Apple could do with it's pile of cash would be to bring Elon Musk in - buy both Tesla and Space-X (he's running out of cash) and let him take over the "visionary" position that's been vacant at the company for 2 years.  Jony then gets to work designing the world's best car and the space technology sets the company up for new horizons.  Do this and the stock will pass Google's current price.

    The truth is Apple needs a kick up the ass, needs to take a risk and be bold.  The mac, the iPod, the phone/tablet have been invented.. what are you going to do now?  keep trimming a few millimeters here and there?  an extra hour of battery life, new colors.. a watch, maybe improve the TV experience?  Boring... people need to come into work at the Spaceship campus and feel like they are helping to change the world, heading for new horizons...  Apple is going to need a visionary sooner or later.  Someone to see what's around the corner.  A guy like Elon is a visionary, but he doesn't know how to run a profitable company.  He needs a guy like Tim to keep the whole thing working.  Jony needs bigger challenges so do Craig and the others...

    Elon isn't coming. Cook isn't going. Jony has the vision.
  • Reply 16 of 38
    Quote:

    Originally Posted by jungmark View Post







    Elon isn't coming. Cook isn't going. Jony has the vision.

    Jony is a brilliant designer.  He makes things look and feel beautiful.  He is not a technology visionary.  I'm looking at Apple long term, how to keep it from becoming a Sony ten years down the line.  Maybe Elon wouldn't fit in, but if he did... if he, Tim, Jony and the others could work together... they could do some amazing things and leave Google in the dust.

  • Reply 17 of 38

    LOL, you're right.  Apple can't keep iphones in stock they are selling so fast, but they will miss.  Brilliant.

  • Reply 18 of 38

    Oh, god no.  Elon is pissing away money on pipe dreams.  Tesla is WAY overvalued an that stock will eventually have a monumental crash.

  • Reply 19 of 38
    Quote:

    Originally Posted by AppleInsider View Post



     


    What a bloody wasteland of human capital.

  • Reply 20 of 38
    jungmarkjungmark Posts: 6,647member
    Jony is a brilliant designer.  He makes things look and feel beautiful.  He is not a technology visionary.  I'm looking at Apple long term, how to keep it from becoming a Sony ten years down the line.  Maybe Elon wouldn't fit in, but if he did... if he, Tim, Jony and the others could work together... they could do some amazing things and leave Google in the dust.

    You don't know what Apple has up their sleeves for 2014. Can't imagine Elon working FOR someone again.
Sign In or Register to comment.