As you may already know, Apple released its earnings and shares spiked. The breakdown in revenues was surprising to many analysts. Most people were expecting a slowdown in iPhone sales but in reality, iPhone sales came in much higher than expected while iPad sales came in much softer than expected. Either way, the firm’s earnings and sales were both much stronger than expected.

More interesting to me is the broad changes in cash management at the firm over the past few years. Just two years ago, Apple was basically not returning any cash to shareholders in the form of buybacks or dividends. Now it has the largest share buyback plan in history and are one of the largest payers of dividends. Apple CEO Tim Cook stated during Apple’s conference call that he believes the company’s shares are still greatly undervalued, and the continued large increases to its share buyback plan is a direct result of this belief. The seven-for-one stock split will bring Apple’s stock to somewhere around $80 per share (after the 7+% spike at the time of this writing). Though the price of the stock should not matter, many individual investors are turned off by a stock that is priced at such a high absolute value. Each of these changes should bring short-term appreciation to the price of Apple’s stock. However, these changes in cash management undoubtedly has to do with Apple management realizing that the company is no longer in a high-growth state.

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Joe Lan
ABOUT THE AUTHOR:

Joe Lan is a financial analyst for AAII. Joe is a graduate of Northeastern Illinois University, where he earned a bachelor's degree with a double major in accounting and finance and holds a master's degree in accounting and financial management from the Keller Graduate School of Management. Joe writes extensively for Computerized Investing and is a frequent contributor to the AAII Journal. Joe also sits on the advisory committees for the Stock Superstars Report and Dividend Investing newsletters. Lan is a holder of the right to use the Chartered Financial Analyst (CFA) designation.

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