AppleInsider Staff
While the $6.5 billion bond issue revealed on Monday may be enough to cover its existing capital return program, Wells Fargo believes that Apple could be forced to either raise an additional round of debt or repatriate cash from overseas if the program is to continue its traditional annual increase.
Wells Fargo analyst Maynard Um believes that Apple's $20 billion in onshore cash and the $6.5 billion bond offering would easily pay for the current share repurchase program and a projected 9 percent increase in the company's dividend, but would not stretch beyond that. Um made the prediction in a Monday evening note to investors, a copy of which was provided to AppleInsider.
As noted by Um, Apple raised $17 billion in 2013 and increased the buyback program by $50 billion with $42 billion in domestic cash on the balance sheet. 2014 brought a $12 billion raise with $18 billion in domestic cash and a $30 billion increase to the repurchase initiative.
It remains unclear whether Apple will in fact enlarge its now-$130 billion capital return program this year. The company spent $5 billion to repurchase 46 million shares in the first fiscal quarter of 2015 and retired an additional 8 million shares.
During the company's most recent earnings call, CEO Tim Cook said that Apple continues to "solicit feedback from a broad base of investors" and promised a program update would be announced during the next call in April.
Activist investor Carl Icahn, who has amassed a significant position in Apple, continues to advocate for increased buybacks. Icahn recently suggested that he would increase his current $203 price target for Apple shares.
William Gallagher
Christine McKee
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23 Comments
With Obama proposing 14% tax on foreign cash, repatriated on not, Apple's hands may be forced. However, at current interest rate of nearly zero, I see no reason why Apple doesn't want to issue more debts to finance their capital plan.
Good luck on forcing Apple to bring back foreign profits at their current taxable rate. I'd simply reduce the buyback if that was somehow forced upon me.
Apple -- or any reasonably smart company -- is not stupid to keep growing its share repurchase program irregardless of where the stock price is. This analyst is Clueless 101.
Maynard Um has downgraded Apple a couple of times in the last 18 months: http://appleinsider.com/articles/15/01/26/wells-fargo-maintains-neutral-outlook-on-apple-says-market-expectations-too-high He and Andy Heagraves of Pacific Crest Securities are two shameless Apple bear who have been proved wrong again and again in the last 2 years but would refuse to admit their wrong call. They just raise their estimate of earnings to cover their error. I would not trust what Um has to say about Apple.
I always find it interesting how borrowing money to do stock buybacks, when you have cash on hand, makes more sense. It tells me our tax system isn't working right.