Print 25 comment(s) - last by TakinYourPoint.. on Mar 20 at 5:32 PM

Apple plans to use $45 billion of its cash reserves over the next three years

It's no secret that Apple is a cash machine. The company rakes in billions of dollars thanks to a legion of loyal fans that lineup hours in advance to purchase its latest and greatest phones and tablets. The company has also seen a surge in its traditional PC business thanks to strong sales of its MacBook Pro/MacBook Air lineup of notebooks and iMac all-in-one desktop computers.
In late January, Apple reported profit of $13 billion on revenues of $46 billion for fiscal Q1 2012. The company saw its stock price cross the $500/share threshold in early February, making it worth more than Microsoft and Google combined. More recently, AAPL has danced with the $600/share mark. In addition, Apple has roughly $100 billion in cash/securities on hand – a figure that CEO Tim Cook said is “more than we need to run the company.”

Apple CEO Tim Cook [Source: David Paul Morris/Bloomberg]

This morning, the company announced a $10 billion stock buyback program that will start in fiscal 2013. The buyback will take place over the course of three years with the primary goal being to "[neutralize] the impact of dilution from future employee equity grants and employee stock purchase programs."
A more immediate action being taking place is a quarterly dividend starting in fiscal Q4 2012. The quarterly dividend will equal $2.65/share.
“Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program," said Cook.
According to CFO Peter Oppenheimer, these programs will burn through $45 billion of Apple's cash reserves over the next three years.

Updated @ 5:12pm
AAPL just closed above $600/share for the first time in its history. 

Source: Apple

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If you want to buy, WAIT
By TakinYourPoints on 3/20/2012 12:52:59 AM , Rating: 0
I've said for a while that Apple is undervalued. Fundamental analysis backs this up and in the very long run it still is given how much room they have to grow.

I believe the current parabolic move is mostly the product of AAPL being sandbagged for over a year due to investor fear (Jobs' health, is AAPL overvalued?). Its price to earnings multiple actually declined as the stock price remained in a relatively tight range, despite ridiculous and sustained year-over-year growth. This frustrated the hell out of many investors who felt that AAPL was being held down arbitrarily.

Suddenly Apple definitively shows that their earnings are way out of line with what Wall Street was thinking. Their PE in February is actually about what it was in October, the only difference is that investors finally couldn't ignore their insane earnings and that they were WAY off with Apple's valuation.

THAT SAID, technically speaking the stock is risky in the short term. If you can be patient, WAIT. AAPL may have been held down by fear and uncertainty over the last few years, but now that pressure built up and is now finally released, things are out of control. Even at $500 a month ago I'd have said buy. Now it is the farthest away I have seen from the 20/50/100 period moving averages in years. When the price is that far away from the mean, a correction is inevitable.

I had a conversation with a friend last March about when to buy more AAPL. He was already long with a $100 average but didn't know what a good price to buy more shares would be at. I said that he should back the truck up if Apple tags the 200 moving average on the monthly charts. It had been a very long time since that happened and he was skeptical. Lo and behold, last June (around the same time Mick posted a story about investors fleeing AAPL) it tagged the 200MA at around $315-$320 and he added more shares. That happened to be the low for the year. Now the media is going crazy about AAPL stock, as good a contrarian indicator as any.

If you want to buy, be patient and WAIT. It'll hit support levels again, and things that go up this fast also go down fast. At best the stock will trade sideways for a VERY long time until the moving averages catch up. Even then, that is as good excuse as any to WAIT. There will be a good buying opportunity again, but there is considerable risk right now.

RE: If you want to buy, WAIT
By Dorkyman on 3/20/2012 10:35:56 AM , Rating: 2
Man, good luck with that technical analysis.

Personally, I put the value of such analysis on par with the intrinsic value of those "magnetic bracelets" you can buy.

I'm more of a "random walk" stock price kind of guy. My analysis consists of trying to imagine the world in 5 years, then buying stock of those companies that will probably be successful in that world. That's it.

By TakinYourPoints on 3/20/2012 5:32:18 PM , Rating: 2
Technical analysis is an excellent way to evaluate risk, especially in the short term. I'm saying that AAPL chart is currently risky, that's all.

If you wish to buy at these levels while AAPL's price is so historically far from its mean and after such a move, be my guest. In the mean time, TA has helped me pick numerous buy levels with reduced risk over the years. Again, wait. I used my pick from last year as an example, got in at the lows of 2011, and it was all from the charts.

If you don't know much about TA then fine, but don't pretend ignorance is knowledge. A good trader or investor will use both technicals and fundamentals to their advantage.

"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997

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