Preferred stock seen as Apple's chance to 'seize the opportunity' and reverse losses
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.
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.
"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.
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.
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.
Comments
One has to remember, investors want make their money the old-fashioned way -- rape and pillage.
I'm sick of these rich and greedy Wall Street self-entitled types. It's a whole other level of trolldom.
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.
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.
Quote:
Originally Posted by mvigod
Apple knows it needs all that money to survive the coming competition and margin compression
Not sure if serious..
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...
Speaking of stupid, did you really have to cite the whole article, graphics included?
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
That's absurd.
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.
You see it correctly!