Apple's stock is all time high crossing $600 range for first time in the history of the Company. Most of the analyst says that this will continue for long time with everyone's target for stock even higher for $800 or more..
Now, question is how much and how long this train will continue. It will definitely continue for short term. Apple is benefitting from sound policies and fundamentals of past decade or so. However, I am cautious, especially when every one is of same opinion, usually that means it is mad rush without applying any brain or introspection..
Another thing, this recent dividend and stock buy back decisions are mainly targeted towards boosting stock value. Steve Jobs was principally against these changes. I don't think that he was God and knew everything correctly. So we can't assume that his way was the best way. However, now it is very clear that this recent dividend and stock buy-back announcement was mainly for increase shareholder value which essentially means that increase in stock price. Essentially working other ways to increase stock value. Which is good. Off-course, CEO and Board is primarily responsible to shareholders.
However, I am with Steve Jobs on this side.. CEO should primarily worry about increasing value of company by increasing value of company by creating more value for customers. All these artificial means like buying back stock or dividend are really short term and also really not very effective in increasing total value of company. If CEO just focus on creating value for customers that will automatically increase value of company overall. Stock dilution or cash in hand or not won't matter. Customers will love your company and reward it any how. In my view these type of things are merely a distraction for CEO. These should be attempted when other strategies are not working or you artificially want to increase stock value by speculations or mathematical jugglery.. This is not a good sign.. along with all the analyst being upbeat.. both of them are sign of brewing trouble or some kind of vacuum in strategy or road map..
There is no easy way, but CEO's salary/bonus should be totally de-linked from short term stock performance. I hope I am wrong here but this seems to be simple effort by board and top executives to increase value of their bonus pool instead of overall real value of company. Times are good so nobody will notice these type of gimmicks and most likely these type of notes will be brushed aside.. Even my heart wants my brain to be wrong.. I love Apple and its product..
Others also welcomed Apple’s decision — announced by CEO Tim Cook during an unusual conference call early Monday before the U.S. markets had opened — to initiate a dividend and share repurchase program this year.
Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Apple shares, said it was an anticipated and apt attempt by Apple to deal with what had become an unwieldy amount of cash. Yet because of Apple’s booming profit, its cash hoard may continue to swell despite the dividend and stock buyback.
“We’re big Apple shareholders, but I’m not in the guessing game of when the growth will slow,” Chervitz said. “We’ve never seen anything like this company before, and revenue growth accelerating as it has is unprecedented.”
By one traditional measure of stock market value, the price-earnings ratio, Apple’s shares are trading below those of Procter & Gamble, and just above General Electric. Both are solid companies but neither is seen as a fast-growing powerhouse like Apple.
Cook said Apple would offer a quarterly dividend of $2.65 a share sometime in its fiscal fourth quarter, which begins July 1, and that the dividend and share repurchase program would cost $45 billion over the next three years. The share repurchase is intended to help offset the effects of employees exercising stock options and selling off shares, and could bolster Apple’s share price.
Apple generated about $30 billion in cash in its latest fiscal year, even after accounting for investments in equipment and other companies. As Apple’s cash pile has grown, the company has felt increasing pressure from investors to do something other than sit on it.
During the call, Cook made it clear that Apple sees a lot more growth to come.
“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future,” Cook said in a statement issued shortly before the 20-minute conference call. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.”
Declaring a dividend, a move long resisted by former CEO Steve Jobs, has benefits that could push Apple’s stock higher: It will reward shareholders and open ownership of Apple shares to a wider range of funds. Many “valueoriented” funds are not allowed to buy stocks that don’t pay dividends.
On Monday, Goldman Sachs raised its target price of Apple stock to $700 a share and other brokerage houses set it even higher.
While the markets cheered Apple’s announcement that it would pay dividends for the first time in 17 years — its stock Monday shot up to a record of more than $601 — not all analysts were elated by the news.
“I’m feeling sad because this means the days of hypergrowth for Apple are over,” said Global Equities Research analyst Trip Chowdhry. “The uniqueness associated with Apple is probably going to change starting today, because it’ll become like Cisco or Microsoft — another mature company with a strong past of dramatic growth.”
However, there is no evidence yet that Apple’s days of dramatic growth are waning. Last quarter, its revenue soared to $46.3 billion, up from $26.7 billion for the same quarter a year ago, putting Apple on course to become the world’s largest technology company in terms of revenue. And Apple announced Monday that in the three days since its new iPad went on sale, the company had sold 3 million of the tablets.
The spectacular sales figures for iPads and other Apple products will guarantee that Apple will have more than enough cash on hand to keep up its growth, Cook said.
“Our main goal,” he told analysts, “is to make the most innovative products in the world, and we decided how much (cash) we needed to do that. We also looked at other things we might invest money in that would come out of domestic cash. After we’d done that and allowed for a war chest for things we can’t predict, we had extra cash left over. We have plenty to run the business, and we felt it would be the right action to declare a dividend.”
Analyst Charles Wolf with Needham and Co. said, “The decision today will have no impact on Apple’s performance. Reducing their cash is financially irrelevant to the business going forward, which is really dependent on Apple continuing to innovate. And I think they have a clear glide path for at least a couple of years.”
Now, question is how much and how long this train will continue. It will definitely continue for short term. Apple is benefitting from sound policies and fundamentals of past decade or so. However, I am cautious, especially when every one is of same opinion, usually that means it is mad rush without applying any brain or introspection..
Another thing, this recent dividend and stock buy back decisions are mainly targeted towards boosting stock value. Steve Jobs was principally against these changes. I don't think that he was God and knew everything correctly. So we can't assume that his way was the best way. However, now it is very clear that this recent dividend and stock buy-back announcement was mainly for increase shareholder value which essentially means that increase in stock price. Essentially working other ways to increase stock value. Which is good. Off-course, CEO and Board is primarily responsible to shareholders.
However, I am with Steve Jobs on this side.. CEO should primarily worry about increasing value of company by increasing value of company by creating more value for customers. All these artificial means like buying back stock or dividend are really short term and also really not very effective in increasing total value of company. If CEO just focus on creating value for customers that will automatically increase value of company overall. Stock dilution or cash in hand or not won't matter. Customers will love your company and reward it any how. In my view these type of things are merely a distraction for CEO. These should be attempted when other strategies are not working or you artificially want to increase stock value by speculations or mathematical jugglery.. This is not a good sign.. along with all the analyst being upbeat.. both of them are sign of brewing trouble or some kind of vacuum in strategy or road map..
There is no easy way, but CEO's salary/bonus should be totally de-linked from short term stock performance. I hope I am wrong here but this seems to be simple effort by board and top executives to increase value of their bonus pool instead of overall real value of company. Times are good so nobody will notice these type of gimmicks and most likely these type of notes will be brushed aside.. Even my heart wants my brain to be wrong.. I love Apple and its product..
OVERFLOWING IN CASH
No end in sight
to Apple growth?
Even after paying for dividend and stock buyback, tech giant’s shares are likely to keep rising
By Patrick May
pmay@mercurynews.com
With Apple’s announcement Monday that it would use some of its ever-swelling cash reserves — now tallying some $98 billion — to pay a dividend, the Cupertino tech giant was getting attention for something other than its hit products.
Apple’s stock has soared, up 77 percent in the past year and hitting a record Monday, widening its lead as the most valuable company on the planet. But despite that ascent, most stock analysts who follow the company think its shares are still worth buying and expect them to keep rising.
Traditionally, companies have begun to offer dividends after their earnings and stock price growth slow. But not so with Apple, said Brian Marshall with the ISI Group, adding that the dividend announcement completes “a trifecta — investors are getting growth, value and yield.”
“Historically, people would say a growth-stock company giving a dividend was a sign to investors to sell,” he said. “But that’s not the case here.”
No end in sight
to Apple growth?
Even after paying for dividend and stock buyback, tech giant’s shares are likely to keep rising
By Patrick May
pmay@mercurynews.com
With Apple’s announcement Monday that it would use some of its ever-swelling cash reserves — now tallying some $98 billion — to pay a dividend, the Cupertino tech giant was getting attention for something other than its hit products.
Apple’s stock has soared, up 77 percent in the past year and hitting a record Monday, widening its lead as the most valuable company on the planet. But despite that ascent, most stock analysts who follow the company think its shares are still worth buying and expect them to keep rising.
Traditionally, companies have begun to offer dividends after their earnings and stock price growth slow. But not so with Apple, said Brian Marshall with the ISI Group, adding that the dividend announcement completes “a trifecta — investors are getting growth, value and yield.”
“Historically, people would say a growth-stock company giving a dividend was a sign to investors to sell,” he said. “But that’s not the case here.”
Others also welcomed Apple’s decision — announced by CEO Tim Cook during an unusual conference call early Monday before the U.S. markets had opened — to initiate a dividend and share repurchase program this year.
Darren Chervitz, co-manager of the Jacob Internet Fund, which owns Apple shares, said it was an anticipated and apt attempt by Apple to deal with what had become an unwieldy amount of cash. Yet because of Apple’s booming profit, its cash hoard may continue to swell despite the dividend and stock buyback.
“We’re big Apple shareholders, but I’m not in the guessing game of when the growth will slow,” Chervitz said. “We’ve never seen anything like this company before, and revenue growth accelerating as it has is unprecedented.”
By one traditional measure of stock market value, the price-earnings ratio, Apple’s shares are trading below those of Procter & Gamble, and just above General Electric. Both are solid companies but neither is seen as a fast-growing powerhouse like Apple.
Cook said Apple would offer a quarterly dividend of $2.65 a share sometime in its fiscal fourth quarter, which begins July 1, and that the dividend and share repurchase program would cost $45 billion over the next three years. The share repurchase is intended to help offset the effects of employees exercising stock options and selling off shares, and could bolster Apple’s share price.
Apple generated about $30 billion in cash in its latest fiscal year, even after accounting for investments in equipment and other companies. As Apple’s cash pile has grown, the company has felt increasing pressure from investors to do something other than sit on it.
During the call, Cook made it clear that Apple sees a lot more growth to come.
“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future,” Cook said in a statement issued shortly before the 20-minute conference call. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.”
Declaring a dividend, a move long resisted by former CEO Steve Jobs, has benefits that could push Apple’s stock higher: It will reward shareholders and open ownership of Apple shares to a wider range of funds. Many “valueoriented” funds are not allowed to buy stocks that don’t pay dividends.
On Monday, Goldman Sachs raised its target price of Apple stock to $700 a share and other brokerage houses set it even higher.
While the markets cheered Apple’s announcement that it would pay dividends for the first time in 17 years — its stock Monday shot up to a record of more than $601 — not all analysts were elated by the news.
“I’m feeling sad because this means the days of hypergrowth for Apple are over,” said Global Equities Research analyst Trip Chowdhry. “The uniqueness associated with Apple is probably going to change starting today, because it’ll become like Cisco or Microsoft — another mature company with a strong past of dramatic growth.”
However, there is no evidence yet that Apple’s days of dramatic growth are waning. Last quarter, its revenue soared to $46.3 billion, up from $26.7 billion for the same quarter a year ago, putting Apple on course to become the world’s largest technology company in terms of revenue. And Apple announced Monday that in the three days since its new iPad went on sale, the company had sold 3 million of the tablets.
The spectacular sales figures for iPads and other Apple products will guarantee that Apple will have more than enough cash on hand to keep up its growth, Cook said.
“Our main goal,” he told analysts, “is to make the most innovative products in the world, and we decided how much (cash) we needed to do that. We also looked at other things we might invest money in that would come out of domestic cash. After we’d done that and allowed for a war chest for things we can’t predict, we had extra cash left over. We have plenty to run the business, and we felt it would be the right action to declare a dividend.”
Analyst Charles Wolf with Needham and Co. said, “The decision today will have no impact on Apple’s performance. Reducing their cash is financially irrelevant to the business going forward, which is really dependent on Apple continuing to innovate. And I think they have a clear glide path for at least a couple of years.”
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