Apple’s Big Payday Will Only Go So Far
Freed offshore cash will likely boost capital return, but stock will remain closely hinged to iPhone’s prospects
By Dan Gallagher
You can buy a whole country with $269 billion. But it might not be enough cash to buy Apple Inc. AAPL -1.16%▲ out of its current jam.
RE-CALL
Apple's revenue by product segment for fiscalyears ended September
Source: the company,
Note: *estimates
That jam is the company’s current iPhone cycle, which not as good as expected. The launch of three new iPhone models last year—including the redesigned iPhone X—seems to have cooled early. Several companies that supply components for the device have warned investors of weakening demand on their quarterly reports, though they remain careful not to mention the iPhone by name, per Apple’s strictures. Apple’s share price has slipped 9% over the last couple of weeks and is now down 4% since the start of the year.
These all may set up a potentially difficult report for the company’s fiscal second quarter, coming Tuesday afternoon. Several analysts have already been trimming their iPhone sales projections for the remainder of the year. And yet the targets may still be too high. Wall Street’s current consensus has iPhone revenue rising 13% year over year, to $39.2 billion, in the March quarter and up 18%, to $29.9 billion, for the June period. And since unit sales are projected to grow only in the low single digits for those periods, analysts still seem to be counting on a fairly rich dose of the highly priced iPhone X in the sales mix.
UNTRAPPEDApple's total cash and debt per fiscal quarter
Source: the Company
A downbeat report and forecast won’t do wonders for the stock. But offsetting it this time around could be a capital return bonanza. Apple has typically boosted its dividend and buyback during its springtime report, and this year’s will likely benefit from the $269 billion Apple has stashed overseas that was freed by last year’s tax overhaul. Toni Sacconaghi of Bernstein expects the company to spend about two-thirds of that amount on capital returns over the next 2½ years.
Given the unlikelihood that Apple will ever plow that money into a monster deal, the company is right to give back some of the largess. It would also be good to pay down some of the $162 billion in debt that has piled up over the last five years—largely to finance previous capital returns while its cash sat offshore. But Apple’s stock remains closely hinged to its product cycle, and that cycle remains dominated by the iPhone. Some things even a country’s worth of money can’t change.
0 comments:
Publicar un comentario