Supply chain channel check stories hurting skittish investors, enriching Apple's sharehold...

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  • Reply 21 of 36
    Rayz2016Rayz2016 Posts: 4,790member
    Buying back stock is a good short term way of increasing stock value as is continuing to raise prices.  Neither is a good way for long term growth.  They need to find the next big thing and reach Asia, not buy their own stock. The reality is 10 years from now China and India will be the economic powers in the world.  Raising prices and buying back stock does nothing to grow those markets.  Apple has reached it's peak here in the states.  Nobody is switching OS's anymore.  Either your an Apple person or your not.  If Apple wants to continue to grow, it needs to figure out a way to compete overseas.  The more it raises prices to make the bottom line look good, that harder it is to compete in Asia.  

    My sense is Tim Cook is only concerned about the short term.  He'll do what he can to keep the stock high as possible during his term.  However, they'll be long term mistakes.  Cook will be Apple's Steve Ballmer. 
    I take it 1971 was the last time you read a financial report. 
    fastasleepradarthekat
  • Reply 22 of 36
    ciacia Posts: 86member
    Good article but one mistake. The article mentions that AAPL's 10K filing says the company bought back shares in the thousands, but they actually bought back shares BY the thousands, so the numbers reflect millions of shares bought back. I think on AAPL's side It's really a weird way of stating a number of shares bought back. From the article: "In its 10K, Apple reported that during September quarter, it bought up 26.9 thousand shares at an average price of $192.50 per share in July. In August, it bought another 36.6 thousand shares at an average price of $214.07. And in September, it kept buying shares—29 thousand—despite the average share price rising to $222.07. Apple shares peaked at $233 in early October." The 10K notes those numbers are thousands of thousands, not just thousands. So they bought back 26.9 thousand thousand shares, or, put simply, they bought back 26.9 million shares. If Apple had bought back under 100k actual shares, that wouldn't have made a dent in the outstanding share count which currently stands at about 4.75 billion outstanding shares.
    edited November 2018 SpamSandwichfastasleepradarthekat
  • Reply 23 of 36
    brucemcbrucemc Posts: 1,540member
    tzeshan said:
    red oak said:
    My model shows Apple buying back 50% of its shares (6.6 billion originally) by 2026.  They are effectively taking half the company off the market.  The analysts don’t even realize the scope of this effort 

    My hope is they use this stock downturn to be super aggressive buying.  The forward PE  less net cash is now below 12
    Buy back shares has a negative effect on AAPL. It drops AAPL market cap. 
    Investors care about the share price, not the market cap.
    lkrupp
  • Reply 24 of 36
    normmnormm Posts: 575member
    tzeshan said:
    Buy back shares has a negative effect on AAPL. It drops AAPL market cap. 
    It's true that a buyback decreases the cash a company holds, and so represents a decrease in the total value of the company.  But even if a company were valued just for its cash, stock and value would disappear in equal amounts, and so this effect wouldn't change the value of the remaining shares.  Since real companies are valued mostly for their earning potential---which isn't affected by the buyback---reducing shares increases the portion of this value held by the remaining shares.

    It might seem that a dividend is a more efficient way to return money to investors, since none of the value of the cash is lost.  I think the idea is that giving them a larger share of the company instead, when it is dramatically undervalued, will give them a better return in the long run.

    edited November 2018
  • Reply 25 of 36
    Apple is buying back incredible billions worth of its own shares...

    Why is Appleinsider suddenly using weird Trumpspeak? What is the purpose of adding 'incredible'. You may as well go all in with 'incredible billion worth of it's own beautiful shares'
    fastasleepradarthekat
  • Reply 26 of 36

    My sense is Tim Cook is only concerned about the short term.  He'll do what he can to keep the stock high as possible during his term.  However, they'll be long term mistakes.  Cook will be Apple's Steve Ballmer. 
    Oof. You sure you want to hitch your cart to that horse?
    radarthekat
  • Reply 27 of 36
    chasmchasm Posts: 1,706member
    DED's conclusions are spot on here ... this is a complete retread of the "iPhone X is tanking" narrative from last year, for the same reasons, and with sob stories from a lot of the same people and companies who were dead wrong.

    All that is required to buck this wave of "bad" news is to stop and think for two seconds: would an iPhone that is 95 percent of a $999 iPhone (the Xs) but costs $250 less really sell poorly? The answer is of course "no."

    We won't know for sure how well the iPhone Xr did against the iPhone Xs, of course, since Apple never broke out iPhone sales by model. But as already noted elsewhere, ANY number Apple hits for fiscal Q1 will be an all-time record, and while services and wearables are going to do very well, the big money will still be coming from ... wait for it ... the latest iPhones. My prediction is that Apple blows past its own guidance, and that Horace Dediu will be the only analyst that is even halfway right about how many of each model Apple is likely to have shipped or sold. Given their track record, under no circumstances should you believe anything that comes out of the lying mouths of Gartner, IDC, or Rosenblatt Stock Manipulators For Profit.
    fastasleepradarthekat
  • Reply 28 of 36
    radarthekatradarthekat Posts: 3,151moderator
    drbilly said:

    Stock Market 101: Wall Street doesn’t control, decide or “set” the price of a stock. Nor does it “reflect” the state of the economy, let alone the state of any company represented.

    For example, the success of Apple (or lack thereof) has no direct effect on the price of Apple’s stock. Rather, when traders are (in general) more interested in selling it than buying it, the price of a stock declines. The opposite is also true.

    If you “Play” the stock market (trade) you quickly discover the only way to make money on a rising stock is to be among the first to buy it (when it is still low). And the only way to avoid losing money on a declining stock is to be among the first to sell it (when it is still high). The net result, folks, is traders don’t watch the company behind the stock. They are watching each other. If a few start selling a stock, the rest rush to sell it, too. If they hear some news (or some analyst’s comments) that they think will cause other traders to react, they will try to be among the first to so react. Thus they become a self-fulfilling prophecy.

    Investors, on the other hand, are interested in the company. They buy and hold for the long term. For them, it’s a savings account with (hopefully) a better return. But because of this, Investors don’t influence price changes in any way.

    Wall Street is not smart, stupid or clueless. People who cry, “They just don’t understand Apple,” don’t understand the market. It’s a mob-mentality, pure & simple. They don’t care about you, me or Apple. They only care about each other and any “skill” they may have is simply the ability to predict what other traders might do before they do it.


    In other words, "traders" are like sheep... If a few suddenly start to run, they all run and in the same direction. Only afterward will analysts attempt to figure out why.

    What's the solution for Apple? Minimize their reliance/exposure to traders. So, you begin share buy-backs and bond issues – with an eye toward reducing your risk (from traders) or perhaps one day eliminating it! (Get out of the stock market and go private. All they'd really need is lots of money to fund themselves! Hmmm.)

    I’ll get off my soap-box, now.

    Excellent observations.  And all too sadly true.  
    edited November 2018
  • Reply 29 of 36
    radarthekatradarthekat Posts: 3,151moderator
    tzeshan said:
    red oak said:
    My model shows Apple buying back 50% of its shares (6.6 billion originally) by 2026.  They are effectively taking half the company off the market.  The analysts don’t even realize the scope of this effort 

    My hope is they use this stock downturn to be super aggressive buying.  The forward PE  less net cash is now below 12
    Buy back shares has a negative effect on AAPL. It drops AAPL market cap. 
    You said what?   How is the drop in market cap associates with share buybacks a bad thing?  It’s completely not a thing at all.  Market cap is not a metric to measure success, period.  Ever.
    edited November 2018
  • Reply 30 of 36
    radarthekatradarthekat Posts: 3,151moderator
    normm said:
    tzeshan said:
    Buy back shares has a negative effect on AAPL. It drops AAPL market cap. 
    It's true that a buyback decreases the cash a company holds, and so represents a decrease in the total value of the company.  But even if a company were valued just for its cash, stock and value would disappear in equal amounts, and so this effect wouldn't change the value of the remaining shares.  Since real companies are valued mostly for their earning potential---which isn't affected by the buyback---reducing shares increases the portion of this value held by the remaining shares.

    It might seem that a dividend is a more efficient way to return money to investors, since none of the value of the cash is lost.  I think the idea is that giving them a larger share of the company instead, when it is dramatically undervalued, will give them a better return in the long run.

    And it allows shareholders to manage their tax liability. 
  • Reply 31 of 36
    asdasdasdasd Posts: 5,330member
    drbilly said:

    Stock Market 101: Wall Street doesn’t control, decide or “set” the price of a stock. Nor does it “reflect” the state of the economy, let alone the state of any company represented.

    For example, the success of Apple (or lack thereof) has no direct effect on the price of Apple’s stock. Rather, when traders are (in general) more interested in selling it than buying it, the price of a stock declines. The opposite is also true.

    If you “Play” the stock market (trade) you quickly discover the only way to make money on a rising stock is to be among the first to buy it (when it is still low). And the only way to avoid losing money on a declining stock is to be among the first to sell it (when it is still high). The net result, folks, is traders don’t watch the company behind the stock. They are watching each other. If a few start selling a stock, the rest rush to sell it, too. If they hear some news (or some analyst’s comments) that they think will cause other traders to react, they will try to be among the first to so react. Thus they become a self-fulfilling prophecy.

    Investors, on the other hand, are interested in the company. They buy and hold for the long term. For them, it’s a savings account with (hopefully) a better return. But because of this, Investors don’t influence price changes in any way.

    Wall Street is not smart, stupid or clueless. People who cry, “They just don’t understand Apple,” don’t understand the market. It’s a mob-mentality, pure & simple. They don’t care about you, me or Apple. They only care about each other and any “skill” they may have is simply the ability to predict what other traders might do before they do it.


    In other words, "traders" are like sheep... If a few suddenly start to run, they all run and in the same direction. Only afterward will analysts attempt to figure out why.

    What's the solution for Apple? Minimize their reliance/exposure to traders. So, you begin share buy-backs and bond issues – with an eye toward reducing your risk (from traders) or perhaps one day eliminating it! (Get out of the stock market and go private. All they'd really need is lots of money to fund themselves! Hmmm.)

    I’ll get off my soap-box, now.

    Keynes said that best when he said trading was like a beauty contest where you don't pick your favourite most beautiful woman but chose the woman you think everybody else would choose, and then take into account that other people would also do this, and on and on,

    https://en.wikipedia.org/wiki/Keynesian_beauty_contest
  • Reply 32 of 36
    knowitallknowitall Posts: 1,463member
    You can talk all the way, but the stock market is a gamblers market and buying back shares is in no way correlated with the share price.
  • Reply 33 of 36
    knowitall said:
    You can talk all the way, but the stock market is a gamblers market and buying back shares is in no way correlated with the share price.
    Do you think Apple's share price would be essentially the same if Apple hadn't bought back around 2 billion shares over the last 6 or so years?
  • Reply 34 of 36
    tzeshan said:
    red oak said:
    My model shows Apple buying back 50% of its shares (6.6 billion originally) by 2026.  They are effectively taking half the company off the market.  The analysts don’t even realize the scope of this effort 

    My hope is they use this stock downturn to be super aggressive buying.  The forward PE  less net cash is now below 12
    Buy back shares has a negative effect on AAPL. It drops AAPL market cap. 
    What’s arguable is your statement that the effect is negative. It’s a fact that buying back stock impacts the market cap. When Apple returns to a 1T market cap, it will need to rise to a higher stock price to do so because of the buybacks just reported. I call the impact of buybacks P/E compression. Horace Deidu focused on that phenomenon about a year or so after Apple’s enormous buybacks started dramatically impacting EPS.

    Now, it’s possible to hypothesize that the impact of buybacks magnifying EPS is still seen as a negative by investors. But it’s no longer possible to say that’s a negative in the long run, because we can track EPS and stock price over the years, and it shows that stock price generally follows EPS. Perhaps this will change if Apple stops growing yet continues to buy back stock. But the reality is that net profit, which is the E part of E divided by S, is still growing very decently for a company of Apple’s size.

    Thus, while you are partially correct, you are also partially incorrect. Hope this helps clarify the situation for you. 
    edited November 2018
  • Reply 35 of 36
    knowitall said:
    You can talk all the way, but the stock market is a gamblers market and buying back shares is in no way correlated with the share price.
    Actually, it is so correlated. Stock buybacks magnify Earnings Per Share and Revenue Per Share. And over the last decade, stock price is closely correlated with EPS, which is closely correlated with RPS.

    Fun fact: AAPL’s P/RPS is about equal to AMZN’s P/RPS. That suggests that they are about equally valued right now. And yet Apple’s cash flow is enormously bigger, forcing Amazon to have a substantially larger growth in revenue to keep up their relative valuation - or for Apple to slowly close the price gap between the two with it’s buybacks....
    edited November 2018
  • Reply 36 of 36
    Apple is buying back incredible billions worth of its own shares...

    Why is Appleinsider suddenly using weird Trumpspeak? What is the purpose of adding 'incredible'. You may as well go all in with 'incredible billion worth of it's own beautiful shares'
    That’s the author, Dilger.

    Besides, the correct word is “incredibillions”.
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