sacto joe

gatorguy said:

sacto joe said:

I do have to clarify one thing, though. This EU action was done before the US changed it’s tax policies. Now, if I understand the tax circumstances correctly (and it’s complicated!), there is a lower corporate tax base but less opportunity to write off foreign taxes. Instead, there’s a sort of guaranteed minimum US tax.

Which is why I say this EU maneuver WAS designed to pick the US Treasury’s pocket....

So now, it’s possible that the money might come directly out of the hide of Apple investors. Or largely accrue to investors if Apple wins.

Which means, if they lose, it’s important for Apple to get to cash neutral ASAP. You can’t tax zero net cash.

Companies don't pay taxes based on how much cash they have. How will cash neutral affect the corporate taxes Apple would owe?

Don’t they? The Ireland operation was essentially a holding company for Apple’s international cash/net profit. What the heck DO you think they’re taxing if not net profit?

avon b7 said:

StrangeDays said:

“if it weren't for Apple selling price-insensitive early adopters on its most advanced tech each year, it simply wouldn't be possible for the company to keep reintroducing the same features a couple years later a prices anyone can afford.”

...this is exactly right. 

It is in fact completely wrong from a technology perspective.

How do you think Qualcomm/Sony etc get by in bringing advanced technology to market?

All Apple would need to do is licence its technology to others and it wouldn't need price insensitive early adopters.

The difference is that it chooses not to. That's fine and that is where the comment does reflect reality - but that happens industry wide anyway. 

On top of that both Huawei and Samsung have brought advanced technologies to market with those infamously low ASPs. How did they manage to pull that one off? Volume. For example the Kirin 990 5G isn't even two weeks old but its sub brand (HONOR) has already announced that its (price sensitive) buyers will be getting it, just weeks after the Mate 30 series launches.

Um, theft? Oh, and a TON of state-sponsored support?

But DED made the most cogent point, which you've glossed over. Apple only makes cutting edge devices, in huge numbers. Not only does that give them the lion's share of profit, but it sets it up, as DED clearly pointed out, for that cutting edge tech to seep downward in price and availability.

Start looking at the really important metric, installed base, and you MAY figure out what's really happening. Although somehow I doubt it....

Soli said:

larryjw said:

tjwolf said:

gatorguy said:

red oak said:

Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 

Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 

This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.

Of course it has impact on stocks. Less outstanding shares over which the net worth is spread. 

But the buyback also reduces their assets on the balance sheet, specifically cash, which is why so many don't think that buybacks have an impact on valuation, but they clearly do for a variety of reasons, but in Apple's case being constantly undervalued is a major reason that the buybacks are beneficial.

It’s a bit broad, but I basically concur. Cash is technically an “asset on the balance sheet”, but it’s an asset that is ignored when valued in the market. You might say that moving it from the balance sheet to an increase in EPS (and Revenue Per Share!) means the value becomes “visible” to investors.

Apple’s almost perpetual state of undervaluation has meant tremendous bang per buck on buyback revenue. That may begin to taper off going forward, if for no other reason than the shrinking net positive cash reserves as Apple moves towards net cash neutral.

Still, Apple is clearing between $50 and $60 B per year. So even after it reaches net cash zero, the cash flow will remain incredible, fueling some hefty buybacks pretty much into perpetuity.

So now let’s talk about Apple using borrowed money to buy back stock. Apple has actually reduced it’s (very low interest) debt to about $100 B by now. So increasing debt is actually a way to reach a “balance” ( the so-called net zero cash state) more quickly. Perhaps more importantly, increasing debt actually increases Apple’s “net zero” cash stash, and with the Trump Tariff starting to take a toll, that excess cash, albeit balanced by debt, can be thought of as an emergency reserve. After all, it’s not set in stone that Apple HAS to balance its debt with cash, and if things go south, I’d expect Apple to break into that cash stash if it needs to.

Cash is considered dead money by the market, and given zero value. So saying the “value” of a company decreases when it’s excess cash is used to buy back shares is wrong. The cash never had value in the first place. Now, one could argue that buying back overvalued shares is a sketchy idea. But that may depend on the future value of those shares, so even that might turn out to be a good idea. BTW, if the market actually started to value cash (hasn’t happened yet), then this calculation would change.

Does buying back shares provably increase the stock price? For Apple, I have a graph that shows a strong correlation between EPS and stock price over the last 11 years, much stronger than against revenue growth or net income. Is that proof? Maybe not, but it shows a very strong correlation. In my opinion, that puts the onus on proving it ISN’T correlated! And it does make sense, because the percentage ownership represented by a share increases as the share count reduces, and valuation has nothing to do with excess cash anyway.

But there’s something else to keep in mind in the case of Apple, and that’s it’s low relative valuation. I haven’t done the numbers lately, but if you add up the cost to Apple of it’s buybacks at absurdly low valuations, the average they’ve paid per share since they started buybacks is far, far below even today’s stunted valuation. Ergo, it’s paid off long term AAPL investors handsomely thus far, and shows every indication of continuing to do so for years to come.