Neil Hughes
The highlight of Apple's next quarterly earnings call later this month could be moderate increases to the company's share buyback program and dividend payouts to shareholders, many investors reportedly expect.
Gene Munster of Piper Jaffray said in a note to investors on Wednesday that he expects Apple to announce an increase for its share repurchase program, as well as its quarterly dividend, in its next earnings report on April 23. Munster said most buy-side investors agree with this line of thinking, representing Wall Street's expectations going into the announcement of March quarter results.
According to Munster, this belief is likely already priced into shares of AAPL, so any announcements come April 23 may not have a significant effect on the company's stock price.
Apple has been under investor scrutiny for sitting on a pile of cash that was at one point near $160 billion. Facing pressure from Wall Street, the company responded by buying back billions of dollars worth of its own shares, and also paying out a quarterly dividend that is currently at $3.05 per common share.
Regarding Apple's actual performance in the March quarter, Munster believes the results will come in on the high side of the company's guidance, which called for revenue to between $42 billion and $44 billion. He noted that in the four quarters since Apple began giving its more "realistic" guidance ranges, it has tended to report toward the high end.
Wall Street generally expects Apple to report revenue of $43.5 billion in the March quarter.
Looking ahead to the June quarter, Munster said current expectations are for 10 percent year over year growth. His own estimates call for Apple to grow 5 percent in the June quarter, though he believes that those results "will be largely ignored" as investors look toward product updates in the second half of the year.
Munster believes investors should buy in to AAPL stock, as he has high hopes for the company's product refresh cycle in the second half of 2014. He said most meetings with investors over the last month have shown that many on Wall Street are skeptical that this year's new products will have a meaningful effect on shares of AAPL, but Munster disagrees.
"We think that buy side expectations for the impact of iPhone 6 and new product categories are relatively low, suggesting upside to shares if the products ultimately are more meaningful," he wrote. "Worst case it seems that an in-line product cycle would mean that shares do nothing."
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15 Comments
Well, that is what I would expect if Apple were to post weak numbers. So… uh.. mmm
expected 10% revenue growth YOY, doom!
Hey does anyone want to bet that Apple does another 15% raise in dividends exactly as they did last year? That would be $3.51 per quarter if anyone is keeping count. If they keep this up over the next 4 years by 2018 the dividend will go to 21.33 per year or $5.33 per quarter. Do you know any other investment which can bring you a 15% compounding return on your money over the next 4 years? The share buy back with more aggressive targets makes even more sense when you see this is the basic plan. 120,000,000 shares could be bought with $90 Billion if share prices stay low. This would only require Apple growing income at 10% per year and still we would see the outstanding share count drop to just under 800 million with employee compensation plans adding 30,000,000 shares. Apple would be saving $2.56 billion per year in dividend payouts if they made that purchase. The income Apple earned over the 4 years would be just shy of $200 Billion. The icing on the cake would be Apple's dividend payout would still be under 38% of earnings. So cash on hand would go up by about $40 Billion after paying out the dividend and the cash on hand would be $200 Billion. A PE of 13 would bring the share price to 926.25 per share. Assuming Mr Market gets a clue and figures out how stable Apples income and profits are we could easily see the PE stretching its legs up to 21. That would bring 1496 per share. Each share would have $250 in cash on hand and debt might be $50. Pure speculation, but not unreasonable. 280 % return on equity and a 175% increase in dividend payout over 4 to 5 years.
They are setting Apple up to be shorted again, they setting goals which they have not clue about, so they can short the stock when it does not meet their made up expectations.
A PE of 13 would bring the share price to 926.25 per share. Assuming Mr Market gets a clue and figures out how stable Apples income and profits are we could easily see the PE stretching its legs up to 21. That would bring 1496 per share. Each share would have $250 in cash on hand and debt might be $50.
The days of 21 PE are long gone. But I see what you're doing and many of us have run these numbers over and over back in the TheMacObserver forum awhile ago...it's not that we disagree, it's that Apple is too easy to play (see below).
But yes, I would agree with you that with share buybacks, increased cash position and a 13+ PE...there is NO BETTER STOCK TO OWN LONG.
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They are setting Apple up to be shorted again, they setting goals which they have not clue about, so they can short the stock when it does not meet their made up expectations.
Only thing you left out was, "rinse and repeat". :-)
But it's not just the shorts, it's also those that move in and out of Apple (and Company X, whose prices move inversely to Apple). This game will continue to be played as long as there's money to be had.
But above, you'll see Macnewsjunkie's rational analysis as to why AAPL will continue to move up in the long term, to which I agree.