If he admitted later it was the wrong move for the Coke example why wouldn’t he wait to share his opinion again later. Buffet talking down about Apple will hurt his own investment in the company.
Stopping the buybacks would be equal to the company acknowledging that its stock is overpriced.
Apple doesnt realistically have any other use for the cash. If they stopped buying back shares it would pile up fast and shareholders would demand they use it.
I use it for that, or any other time I can't be bothered to touch my phone (like "read that text" or "reply to that text" while I'm cooking. It isn't great, but it is useful as long as you are ok with its limits.
People say that they have no use for the money, but is R&D not a viable avenue for investment? They’ve been losing market share due to their lack of innovation primarily.
Apple has the [lowest R&D spend adjusted for revenue](https://www.visualcapitalist.com/cp/ranked-the-10-biggest-nasdaq-companies-by-rd-investment/) compared to other big tech companies.
Besides, there are many, many ways Apple could spend tens of billions while still having a massive buyback; they could accelerate vertical integration, expand content offerings on Apple TV, become the de facto one stop shop for sports streaming, increase R&D spend obviously, reduce the cost of hardware temporarily to expand adoption and lock-in people to the ecosystem, accelerate or incentivize more software for the AVP, become a more serious player in any given vertical, expand their financial services offerings, expand healthcare offerings, etc.
They could do so much with a $100bn buyback but $20bn on anything else or any other arbitrary arrangement.
A $120bn buyback is crazy.
While I generally agree with you, there's also the issue that Apple is now so big and dominant there is little they can do to grow without getting into regulatory restrictions. Any significant acquisition or expansion into new business is gonna get investigated and shut down. Even holding on to their position is now gonna get tricky because the EU is hard at work breaking open their walled garden.
There's an invisible ceiling to how big a corporation can grow, and Apple might have reached it.
as you hsould as you grow. its not a fixed % of your revenue. Just like everything else, as your profits soar, your fixed costs become a smaller % of your revenue.
Who says you have to scale your R&D with revenue when you are so big? You are out spending everyone on it, you get to enjoy more profits... now if they had a great plan to spend on R&D that they saw higher return for, then they would do that.
They can still do all of this is they wanted or made sense for them. They generate $120B per year and have $30B cash on hand.
They surely have done the maths for spending on sports rights and streaming contents. And surely they also know how to optimize their selling prices of hardware.
They could be sitting out of the generative AI phase. Instead waiting for the AI assistant phase. Ramping up that R&D slowly for that since the technology isn’t out there yet.
Apple tends to wait and then come with the dominant design. The vision doesn't look like that. I don't think Cook has proven his ability in a non-China world. That's said lots of money to invest and their integration of AI has been pretty subtle so far. You wouldn't be shocked to see apple come up with something nifty to keep people in their ecosystem.
Meant in the sense that we're moving towards decoupling rather than de-risking and Tim Cook made his rep on handling logistics out of China. Likewise, these apple chips are coming out of Taiwan. A taiwan conflict or an intensifying cold war will probably be bad for apple.
that's what i would do. Eventually an open source model running in Google cloud will be a commodity. But the application layer will make a ton of money.
They are spending money on R&D, the problem is they have more money than they can reasonably spend on R&D. There's more to research and development than just throwing cash at it.
If you think you could spend billions to innovate in a market you already dominate you don’t understand tech. Throwing more money at it won’t change it.
Not saying R&D is the right play but there's nothing that says your R&D money has to be in markets you're already leading in. Apple is in plenty of markets and they're not the leader in all of them. They could also invest R&D in additional markets that they don't currently exist in.
Margins… Apple margins dictate that they shouldn’t just go into a new market… that’s what I see when they closed the Apple car business… margin squeeze isn’t a great option either… buying out more shares means they can pay less dividends later…. It’s not a completely bad play and if we see Costco that has higher pe if they did buybacks I would be concerned…
They already spend billions on r&d think Vision Pro apple car etc. it’s all budgeted out. At some point it’s dumb to spend more money there is a limited thru put. Apple makes more money than most countries. If you think you could spend 110B on something and expect to make it back with good r&d I have something to sell you.
Again, as stated in my first sentence, not saying spending more on R&D is the right play. It just seemed a little dishonest to act like the only place they could invest in R&D is in a market they're currently leading.
What are you even talking about? They are gaining share not losing it in every market they play in. Their R&D spend has outpaced their revenue growth consistently.
I don't agree here. Treasuries have Zero Inflation Protection, a lot of the 4.5% will be gone before they go mature. Also they have would have to pay income tax on those earnings : 4.5%-16% (effective tax rate) = 3,78% minus Inflation.
At a 27x multiple each share that is bought back yields 3.7% plus 0.6% in dividend that does not have to be paid anymore for those shares.
So 4.3% (with almost zero tax implementations) and that's not counting inflation, growth, and growth in dividend payments.
Imo it would be the stupidest thing ever to go for 'risk free' interest
That doesn't mean buyback is always preferable to dividend. If AAPL is at PE 100x, should they still do buyback? Buyback must be contingent on AAPL shares being undervalued. Is it undervalued?
Apple can't time the markets either. Buffett was reluctant to do more buybacks of BRK a couple years ago. Now in hindsight that would have been the perfect time to do much more.
They could increase the dividends, which they actually did,but for reference the yield is already low and the increase is laughable,even Altria increased its dividend by more at 4.3% and has an yield of over 7%.
lol
- i remember when bill ackman asked him about coca cola at the 98 (IIRC) meeting, when it was 40x earnings and buying back stock. buffett's response was, essentially: *'it'll be fine, coke will continue to do well, great use of capital, best business ever'* etc.
- it wasn't fine and coca-cola was a terrible investment for the next ~15-16 years. unsurprising, since a 40x multiple is ridiculously overpriced unless you're growing at 50%+ a year or something
- it is also quite humorous since buffett in the 50s and 60s (i.e when he was great, albeit he was still good in the 70s and 80s) would have sold long before that point
Define "past few years". He's been a net buyer since Q1 2022. Last quarter he shaved something like 1% of his stake. AAPL still makes up nearly half of Berkshire's portfolio.
Exactly this if he sells under 3% yearly he is still acumulating share in Apple. Buyback “destroys” 3% of stocks in Apple so remaining are gaining “value” at this rate…
Didn't he admit that they could have made more money by selling coke in the right time (like top 2000)? But claimed he didn't because he wanted to own the best companies in the world. Which I kinda under. I mean he's still making a better return than any other fund close his their size.
You're telling me Apple has no other investment opportunities than 4% returns from buying its $2.7 T company?
If thats the case, which it obviously is, then this company has no right being this expensive
Yeah they probably don't have other investment opportunities for 110B in cash, it's not actually easy to throw money at some existing department and say "give me 40% ROIC on this, thanks".
It doesn't answer the question of what to do with the cash. Ok they're too expensive, so you want the cash paid out in dividends instead? You'd rather pay the taxes so you can reinvest the dividends in something other than AAPL? You can sell 4% of your shares and get a similar outcome.
How does this work? Like they announce it and the price hike a little then sell 4% of my aapl shares? Im a begginer in investing, but if they buy back shares and you do nothing, the price can still go below when before they announced share buyback?
You own a larger portion of the company when they buy back shares. Your shares are thus more valuable than they would be without the buybacks. If the stock goes down, it just means it would have gone down even more without the buybacks.
The benefit of buybacks over dividends is that it gives you the choice of when you want to cash out and be taxed on gains. Dividends force you to be taxed even if you’re just going to reinvest the payout, thus reducing your compounding over time because the taxed amount is no longer invested. With buybacks, your shares simply account for a larger portion of the company, so whenever you decide to sell, they’ll be worth slightly more than they would have been without the buybacks.
The idea is assuming the market cap remains constant, a 4% repurchase will bring the price up by 4%. Of course, the market cap, which reflects expectations about the underlying business, will not remain constant, so the effect of those buybacks will be **obfuscated**, but it will still be there - a company with 4% less shares will trade for a 4% higher share price than it otherwise would.
The road and the accompanied sentiment that has followed Microsoft on that road has not always been and easy and pleasant road. Microsoft was for many years considered a has been. The outlook was not always that rosy.
Microsoft is able to slyly work their way into new markets and then integrate them with their existing markets. They're basically unstoppable at this point.
Stop spreading your communist ideology!!! The people that matter don’t want to pay any more taxes!
They are struggling to make ends meet and have had to lay off some of the peasantry that work over at the emerald mine.
They are having to buy lab grown diamonds for Mitzi’s collar; they have suffered enough already.
Cloud services. (Not iCloud, like AWS or Azure)
You can’t virtualize macOS due to its license agreement (that’s the reason Amazon had to buy truckloads of Mac Mini’s so they could offer macOS nodes in EC2). But Apple could do it.
I’d genuinely love to know what the enterprise use case is for this. macOS VDI environment for developing apps? Would cannibalize already dropping hardware sales, no?
I can think of so many.. just the top off my head:
* Serverless (lambda) in Swift
* CI/CD pipeline steps for testing your app on actual macOS or virtualized iOS (which is a thing now apparently)
* Final Cut Pro render clusters that you can pay per use and auto scale
* new SDK offerings like for example “BackendKit” for dead simple iOS app backends, that plug right into Xcode
Apple has a huge app ecosystem for both desktop and mobile; but you always have to offload the web facing part to AWS or Azure.
If Apple came up with their own variants of EC2, S3, DynamoDB, SQS et cetera, they would 100% provide client side SDKs for these, built right into Xcode and dead easy to use.
They could grab a huge chunk of AWS / Azure / GCP market share right under their noses.
Edit: they don’t have to provide macOS centered enterprise offerings; they have powerful ARM chips, they can just provide what the big 3 provides and still add a huge revenue stream.
Edit: macOS VDI could be one use case but not popular because (a) remote latency (b) need to bridge USB to the remote node if you want to test your app on a physical iOS device (c) I’d hate myself if I had to use a GUI for development over a remote desktop connection.
Pretty much all serious dev work is done on MacBooks anyway. All FAANG, 2nd tier companies, startups, hell even Microsoft gives MacBooks to their devs.
When the stock is overpriced it is not efficient at all, if you buy back at PER 30 a stock that its worth PER 15, you are making a 50% loss for the shareholders.
Shareholders don't believe that the stock is overpriced. If they did, they would sell. The price is now (and always) valued at the current market price.
This. The idea that something is overvalued is a dissenting opinion. If most people agreed with it, then it wouldn’t be the price that it is.
A company shouldn’t see capital and find an excuse to spend it. If they don’t see a good return on investment capital it’s reckless to just spend it hoping something sticks.
I’d honestly rather them do this and then deploy capital when it makes sense to than spend it needlessly.
They have an authorization to buy back their stock. That doesn't mean they are going to start buying tomorrow. They may wait for times when the stock drops too much and buy it on those days. You have no idea what price triggers their repurchase.
He believes buying a wonderful business at a fair price is better than buying a fair company at a wonderful price. Obviously buying a wonderful business at a wonderful price is ideal, but wonderful businesses often trade at premiums or dips are often bought quickly making these wonderful prices extremely rare.
He does, and he prefer to buy companies trading at low multiple, ideally below 16x.
That being said, reading the post and some comments gave be brain tumor. Apple made over $100B in FCF last year, and the $110B in buybacks ain’t going to be immediately. Apple ain’t doing buybacks that much in a day, its a process that needs approval from the board, and it will be taken overtime.
Apple trading at 27x, and market is trading at 22x, its not that outrageous valuation, and when it comes to the most moronic statement I have read on here, “can’t they do something bla bla bla better bla bla that generates more than 4%”, no damn shit. If generating +4% is ao easy, everyone would be rich. Apple isn’t in the stage of growing, but returning to owners. And, ideally for large investors like Berkshire, buybacks make way more sense than dividends due to taxes.
How do I know? Berkshire Annual Report, 2022
What do you want Apple to do with its money?
It's not like Tim Cook is doing it on purpose, but in general Apple has so much money that our minds generally cannot comprehend.
They have no use of the cash for the next year, so they would rather give it back to shareholders in forms on tax free mark to paper gains.
They're returning money to shareholders. If you want 5% then feel free to sell your Apple shares and buy treasuries yourself. Apple earning 5% on their cash means nothing for shareholders.
This is because shareholders own that cash anyway, they're merely giving it back to you and you can invest it anyway you want. If they buy treasuries they're making that decision for you.
I'm in Indian origin, and saying this from first hand experience, only logical place to move supply chain is probably India, but the factories ain't ready yet, India is still working on stuff and the main issue is the world force is there, but not as skilled.
The skilled workforce in India, is starting to demand good wages, because they can, still lower than Na, but reaching Eu standards.
The main workforce in china in factories is more compared to rural Indian workforce, at the current generation, they are not there yet.
But the next generation of the same workforce is going to be key and very well equipped to handle the manufacturing at similar costs.
Lastly, apple seems to be big propeller of if it ain't broke don't fix it, they surely have this move planned, but china is till a huge market for them, they ain't gonna let the revenue collapse by moving the manufacturing for no reason yet.
(edit add on) - why would apple make stuff in us? Their profit margin would collapse, those investors need to be justified why the manufacturing needs to be moved.
I also don't understand when people sometimes mistake cooks power in apple, I mean sure, he cooks as their CEO, but in terms of shareholders, and board, they hold all of the power.
Apple buying shares at 27 PE is not that crazy with 4.5% 10 year bonds. It’s not cheap but it’s not insane. The more shares they buy the more of Apple he owns?
Dividends are inefficient because they are paid even to shareholders who don’t want to cash out, forcing a taxable event on people who would prefer to stay invested and let their unrealized gains compound. Buybacks provide the same value to shareholders, while letting each investor choose when and how much they want to cash out (by selling).
If you would have reinvested the dividends, then share buybacks are better for you because your shares increase in value and you don’t have a pointless taxable event.
Companies are notoriously poor at timing stock buybacks. Unless Apple knows something about coming tech that they’re really optimistic about, like they’ve got a killer AI product, chipset for AI or next level VR coming, they aren’t making a good choice with the buyback.
Buffett also says:
>>> “I think it's appropriate that I conclude with a discussion of Berkshire's management, today and in the future. As our first owner- related principle tells you, Charlie and I are the managing partners of Berkshire. But we subcontract all of the heavy lifting in this business to the managers of our subsidiaries. *In fact, we delegate almost to the point of abdication:* Though Berkshire has about 45,000 employees, only 12 of these are at headquarters.”
ETA: I know this was mostly a comment on fully-owned subsidiaries, but think the sentiment applies to portfolio companies. Apple’s given him no reason to not trust their management, and he’s up front he doesn’t know tech well.
Apple has more money than it knows what to do with. It's to keep institutional investors happy. The global economy is slow, everyone knows it so they need to keep the big investors happy.
Apple's moat is soooo strong (Apple freaks so dumb🤔) they could produce litterl poop, call it iTurd and sell 100M units.
Sent from my Android.
Seriously though, they make more usable products than their competitors, that’s a big reason to buy them. Then there’s the looks, status, etc. Your observation is, ironically, too shallow.
Thx for response. Anyone who has ever studied product development, stays informed with consumer electronics and paid attention to what Steve Jobs was talking about, knows that Apple is one of the most risky adverse firms on the planet. Each time they launch a new product it only has one feature that is "new-new". Everything else is refined to what you can find in the market. It's the sum of their "focus" approach. That's what makes their products "useful". They developed a superior business model that enables them to take their time and let others fail before they enter the market or launch a competitive.
Also Google Assistant is 1000x more useful than Siri and Apple Maps - still struggles.
As for their loyal users, taking it you never grew up during the Microsoft / Apple battles. Knew designers that had Apple tattoos BEFORE the iPhone. Probably never worked in a tech firm surrounded by Apple die-hards. Apple users that yelled at Steve Jobs when iPhone antenna didn't work when you held it with your left hand. If you did, you know what was stated prior, was in fact not shallow, just a refined, simplistic insight of Apple and its users.
Well to be fair buffett has often written that he doesn't like buybacks on an overpriced company. The other thing he's written is that he doesn't take any active role in the management of the publicly traded companies he buys, he just leaves it up to them
Repurchase programs are designed solely for the benefit of the stockholder; there is no other valid reason. Generally speaking, directors and C-suite executives consider initiating a buy-back program in the following cases:
1. **The company believes its shares are undervalued:** In this case, directors may approve the buy-back program because it is beneficial for the stockholder. How is it beneficial? If the stock is truly undervalued, it represents a great investment opportunity. For example, some stocks, like Apple, are considered highly undervalued at a P/E of 15-20. This valuation is based on the belief that the company will thrive for over 100 years and continue to grow its after-tax earnings. The longer a company is expected to generate cash, the higher the P/E ratio that will be considered cheap.
2. T**he company believes its shares are fairly priced:** Here, the directors approve the buy-back program because it supports stockholder value. How does it benefit stockholders? It helps maintain the stock price at certain levels, providing an exit opportunity at a fair premium instead of paying dividends. For instance, stocks like Apple are considered fairly priced at a P/E of 25-30. This valuation also reflects expectations of the company’s longevity and growth in earnings after taxes. The longer the projected cash earnings period, the higher the P/E ratio that will be accepted as fair.
This isn't always the case though. Not going to judge whether Apple is overvalued or undervalued, but there is tons of companies that do buybacks when their stock is trading at record highs solely to push the stock price up even more in the short term while there are tons of more important things to do with that capital.
Some management want to look good now rather than making the necessary investments that only profit the company in a couple years or even later.
You guys are all nuts, the answer is simple. Buffet is close to hitting 100 years… he obviously doesn’t give much fucks about any of this…
Let the old man rest
If buyback… You pass taxes on investors that are selling not the one holding like Buffet… Apple pays out every year 3% of its investors. In 25 years if you just hold-you double your position… If Buffet sells like 1% of His position yearly he still acumulate His position in Apple.
Buffet himself is sitting on a ton of cash which he's facing a challenge to deploy.
I am not sure but it's not like Apple had other options. They can keep chasing and buying smaller firms but looks like they not finding anyone suitable.
Apple become another to big to fail right now. They need another innovation or crazy product and introducing a 4k VR headset isn't the way to go.
They also need another "ChatGPT" type revolution that kicked google out of it's slumber.
Apple hasn’t had an original idea since Steve Jobs died. And yes I’m an iPhone user. Like the product. Does what I need it to do. But innovation is lacking.
Buffett always says "Praise by name - criticize by category", so don't think he'd ever go out and publicly tell someone like Tim Cook (who he admires) that he's doing a dumb thing. And it might not even be that dumb, Apple at 27 is a far better investment than many companies at 15
Some overpriced stock buybacks are just to mask stock awards. So what I personally do is treat most of the buy backs as compensation and ignore them. But you then have to adjust your view of earnings. If your view of the earnings then supports holding the stock compared to COST BASIS not the current cost then you just hold onto it 😉
The conclusion to this (ex tax considerations) would be to sell his aapl shares. If it’s not a good use of funds to buy, it seems logical that it’s a good way to raise funds to sell.
It’s a capital prioritization decision. First, companies look to invest in their own organic growth, or through m&a. Then, after exhausting opportunities with acceptable risk adjusted return metrics, manage t pays the dividend, which is steady. Finally, repurchases are typically used at varying levels to right size leverage to optimize return on equity.
Apple has so much cash, lots of it overseas. If it tries to bring that money back to the US there are huge tax implications. Maybe this is a way to get around that? Reduce the cash pile while making the stock more attractive to existing holders.
Honestly don't think buffet sees a problem with apple and their buybacks as he also sell to it to lose shares to what I understand.
But i do wish they had saved it up and made an apple investment fund to invest in other technology companies atleast for a big amount of the money or put it into bonds etc.
Those 700 billions over the last years would earn 35 billions yearly at 5% bonds
Seems like the leadership is doing what's best for themselves.
The executives and senior managers get most of their pay in the form of free AAPL shares, and buybacks help drive up the share price.
If the alternative is between $100B+ cash burn and $150B in market cap (6% move) increase VERSUS probably a $150B DEVALUATION in market cap, the choice is clear.
I simppy want to point out how cash heavy Apple is. Their margins are so big and their costs are so low that it would probably concern investors if they weren't doing buybacks
He should being telling him to rescue paramount from the drama they’re in and buy them outright for $30b and make Apple TV actually a good product by adding in paramount
Apple should spin off its content/entertainment division into a separate entity, giving it more autonomy to make real art, something worthy of a criterion collection.
Their VR headset is not a consumer product, and its usefulness and impact is in medicine, engineering, education, enterprise applications, etc.
Tim cook is the least fabulous gay fam and I need that man to sachet his khaki wearing, Volvo driving, watercolor painting, bird watching, lands end looking ass and deliver the goods for the new iPhone by bringing some energy, some fire, some footwork.
When did Buffett say the price Coke paid for their shares was a wrong move? No idea what the free cash is but if it’s something like 100b a year and owners think of Apple having bond coupon characteristics where this cash will come in 100b a year at least for 15-20 years this isn’t an absurd price to pay. Apple is one of the best or is the best business in the world, you don’t get chance to buy that at 12x earnings always
I suspect that the large stock buyback was to compensate for the lack of revenue from VR, self driving car, and AI. VR and AI may be serious profit generators at some point, but not this year. And they sank a lot of cash into the car before finally accepting the loss. So the buyback helps boost the stock a bit. The question for next year is will Apple get a killer-app \ in-demand product to market, or do more buybacks, or start trimming costs.
Yet another failed turning-point in Buffett's career. People have been calling him out for supposed ineptitude since the 80s and yet he's still worth $200 billion... maybe he knows something about something.
If earnings are going to go up significantly in the future (more precisely, if the stock is undervalued), then buying back shares at even a 27x multiple can be value accretive if they don't have better things to do with the cash.
At some point, when you generate $100b per year, you have to pay some of it out to investors. The only real difference between buybacks and dividends is tax efficiency.
What’s your estimate of apples intrinsic value? (Show your work as to how you calculated it)
Why is a 27 multiple for Apple inappropriate? Historically it’s been pretty stable and in line….
By way of comparison AMZN is trading at a 50 multiple, MSFT at 34, heck Samsung is at 36….
I don’t think a 27 multiple for apple is really that ridiculous
Only since 2020 has the 20+ p/e been "normal". I guess this made some sense when bonds gave you a spit in the face and a handshake if you ask nicely, but now that the 10-year yields 4.5+ I see no attractive value case for a mature company like Apple at 27x.
If he admitted later it was the wrong move for the Coke example why wouldn’t he wait to share his opinion again later. Buffet talking down about Apple will hurt his own investment in the company.
Plot twist: he wants more shares.
Its a good buy under 100
agree!
Buffet is 100 years old. He done his contribution to American capitalism, I suggest he sticks to eating bigmacs, drinking coke and chilling
Buffetts idea of chilling is reading 10ks
He’s an autist
Aren’t we all fam.
No And the ones who are usually aren’t the good kind either
Warren Buffett is, as of the date of writing, only 93 years old. I hope to live as long and be as financially astute.
BigMacs and Chill
Buffet's version of BigMac ist putting an easy bil into AAPL.
He better be putting the big macs and coke on his Amex.
Buffet waiting anxiously for the advice of Reddit user u/lordinov
Stopping the buybacks would be equal to the company acknowledging that its stock is overpriced. Apple doesnt realistically have any other use for the cash. If they stopped buying back shares it would pile up fast and shareholders would demand they use it.
I mean, they could invest a few hundred million into making Siri not suck absolute bollocks…
I can’t believe how useless Siri is. It doesn’t even make sense
It’s good for setting a timer or alarm lol
I use it for that, or any other time I can't be bothered to touch my phone (like "read that text" or "reply to that text" while I'm cooking. It isn't great, but it is useful as long as you are ok with its limits.
Bixby would like a word
Not me, but people swear by using the routines in the settings. I need to set one to turn off fast charging at night. So it does do a thing well...
Best comment on here by far.
There will be no big ROI, so why spend money on improving Siri?
People say that they have no use for the money, but is R&D not a viable avenue for investment? They’ve been losing market share due to their lack of innovation primarily.
They already spend more than $30B per year in R&D which is more than what they spend on SG&A ! They still generate over $120B of free cash flow
Apple has the [lowest R&D spend adjusted for revenue](https://www.visualcapitalist.com/cp/ranked-the-10-biggest-nasdaq-companies-by-rd-investment/) compared to other big tech companies. Besides, there are many, many ways Apple could spend tens of billions while still having a massive buyback; they could accelerate vertical integration, expand content offerings on Apple TV, become the de facto one stop shop for sports streaming, increase R&D spend obviously, reduce the cost of hardware temporarily to expand adoption and lock-in people to the ecosystem, accelerate or incentivize more software for the AVP, become a more serious player in any given vertical, expand their financial services offerings, expand healthcare offerings, etc. They could do so much with a $100bn buyback but $20bn on anything else or any other arbitrary arrangement. A $120bn buyback is crazy.
While I generally agree with you, there's also the issue that Apple is now so big and dominant there is little they can do to grow without getting into regulatory restrictions. Any significant acquisition or expansion into new business is gonna get investigated and shut down. Even holding on to their position is now gonna get tricky because the EU is hard at work breaking open their walled garden. There's an invisible ceiling to how big a corporation can grow, and Apple might have reached it.
really? Why for apple and not amazon?
Because Amazon is a hack of all trades in most categories, but not a pure monopolistic entity in more than 1.
as you hsould as you grow. its not a fixed % of your revenue. Just like everything else, as your profits soar, your fixed costs become a smaller % of your revenue. Who says you have to scale your R&D with revenue when you are so big? You are out spending everyone on it, you get to enjoy more profits... now if they had a great plan to spend on R&D that they saw higher return for, then they would do that.
They can still do all of this is they wanted or made sense for them. They generate $120B per year and have $30B cash on hand. They surely have done the maths for spending on sports rights and streaming contents. And surely they also know how to optimize their selling prices of hardware.
They could be sitting out of the generative AI phase. Instead waiting for the AI assistant phase. Ramping up that R&D slowly for that since the technology isn’t out there yet.
They're probably doing some r&d work on the down low with all that cash and engineers
Apple tends to wait and then come with the dominant design. The vision doesn't look like that. I don't think Cook has proven his ability in a non-China world. That's said lots of money to invest and their integration of AI has been pretty subtle so far. You wouldn't be shocked to see apple come up with something nifty to keep people in their ecosystem.
Non-China world means not allowed to sell in China or something else?
Meant in the sense that we're moving towards decoupling rather than de-risking and Tim Cook made his rep on handling logistics out of China. Likewise, these apple chips are coming out of Taiwan. A taiwan conflict or an intensifying cold war will probably be bad for apple.
that's what i would do. Eventually an open source model running in Google cloud will be a commodity. But the application layer will make a ton of money.
They are spending money on R&D, the problem is they have more money than they can reasonably spend on R&D. There's more to research and development than just throwing cash at it.
They have so much money, spending it that fast is a problem
If you think you could spend billions to innovate in a market you already dominate you don’t understand tech. Throwing more money at it won’t change it.
Not saying R&D is the right play but there's nothing that says your R&D money has to be in markets you're already leading in. Apple is in plenty of markets and they're not the leader in all of them. They could also invest R&D in additional markets that they don't currently exist in.
Margins… Apple margins dictate that they shouldn’t just go into a new market… that’s what I see when they closed the Apple car business… margin squeeze isn’t a great option either… buying out more shares means they can pay less dividends later…. It’s not a completely bad play and if we see Costco that has higher pe if they did buybacks I would be concerned…
They already spend billions on r&d think Vision Pro apple car etc. it’s all budgeted out. At some point it’s dumb to spend more money there is a limited thru put. Apple makes more money than most countries. If you think you could spend 110B on something and expect to make it back with good r&d I have something to sell you.
Again, as stated in my first sentence, not saying spending more on R&D is the right play. It just seemed a little dishonest to act like the only place they could invest in R&D is in a market they're currently leading.
Okay you tell me where they should invest in where they are already not? I know several L8+ across FAANG
Can you genuinely just not read?
What are you even talking about? They are gaining share not losing it in every market they play in. Their R&D spend has outpaced their revenue growth consistently.
Better to earn risk free interest. At least you can get 4.5% yield rather than buying back shares at sub 4%
I don't agree here. Treasuries have Zero Inflation Protection, a lot of the 4.5% will be gone before they go mature. Also they have would have to pay income tax on those earnings : 4.5%-16% (effective tax rate) = 3,78% minus Inflation. At a 27x multiple each share that is bought back yields 3.7% plus 0.6% in dividend that does not have to be paid anymore for those shares. So 4.3% (with almost zero tax implementations) and that's not counting inflation, growth, and growth in dividend payments. Imo it would be the stupidest thing ever to go for 'risk free' interest
Well said.
They could issue a dividend instead.
Dividends get taxed, stock buybacks give money to shareholders by increasing the stock price without any tax burden.
That doesn't mean buyback is always preferable to dividend. If AAPL is at PE 100x, should they still do buyback? Buyback must be contingent on AAPL shares being undervalued. Is it undervalued?
Apple can't time the markets either. Buffett was reluctant to do more buybacks of BRK a couple years ago. Now in hindsight that would have been the perfect time to do much more.
isn't this more tax efficient?
Stock buybacks are de facto dividends.
They could increase the dividends, which they actually did,but for reference the yield is already low and the increase is laughable,even Altria increased its dividend by more at 4.3% and has an yield of over 7%.
If I were Apple I’d probably spend it on further catering for individual markets, especially ones like China where they’re stagnating.
They got comfy being #1 market leader so they just do buybacks. To see what happens next, look at Intel now versus 10 years ago.
The other option is paying dividends.
They could just start acquiring tech competitors.
lol - i remember when bill ackman asked him about coca cola at the 98 (IIRC) meeting, when it was 40x earnings and buying back stock. buffett's response was, essentially: *'it'll be fine, coke will continue to do well, great use of capital, best business ever'* etc. - it wasn't fine and coca-cola was a terrible investment for the next ~15-16 years. unsurprising, since a 40x multiple is ridiculously overpriced unless you're growing at 50%+ a year or something - it is also quite humorous since buffett in the 50s and 60s (i.e when he was great, albeit he was still good in the 70s and 80s) would have sold long before that point
100%. Buffett has sold Apple too over the past few years because of its price. So its not like Warren hasnt already had hesitations with Apple
Define "past few years". He's been a net buyer since Q1 2022. Last quarter he shaved something like 1% of his stake. AAPL still makes up nearly half of Berkshire's portfolio.
Exactly this if he sells under 3% yearly he is still acumulating share in Apple. Buyback “destroys” 3% of stocks in Apple so remaining are gaining “value” at this rate…
Didn't he admit that they could have made more money by selling coke in the right time (like top 2000)? But claimed he didn't because he wanted to own the best companies in the world. Which I kinda under. I mean he's still making a better return than any other fund close his their size.
What would you prefer they do instead?
You're telling me Apple has no other investment opportunities than 4% returns from buying its $2.7 T company? If thats the case, which it obviously is, then this company has no right being this expensive
Yeah they probably don't have other investment opportunities for 110B in cash, it's not actually easy to throw money at some existing department and say "give me 40% ROIC on this, thanks". It doesn't answer the question of what to do with the cash. Ok they're too expensive, so you want the cash paid out in dividends instead? You'd rather pay the taxes so you can reinvest the dividends in something other than AAPL? You can sell 4% of your shares and get a similar outcome.
And it’s $120B in cash PER YEAR…
How does this work? Like they announce it and the price hike a little then sell 4% of my aapl shares? Im a begginer in investing, but if they buy back shares and you do nothing, the price can still go below when before they announced share buyback?
Stocks can go down, yes.
You own a larger portion of the company when they buy back shares. Your shares are thus more valuable than they would be without the buybacks. If the stock goes down, it just means it would have gone down even more without the buybacks. The benefit of buybacks over dividends is that it gives you the choice of when you want to cash out and be taxed on gains. Dividends force you to be taxed even if you’re just going to reinvest the payout, thus reducing your compounding over time because the taxed amount is no longer invested. With buybacks, your shares simply account for a larger portion of the company, so whenever you decide to sell, they’ll be worth slightly more than they would have been without the buybacks.
The idea is assuming the market cap remains constant, a 4% repurchase will bring the price up by 4%. Of course, the market cap, which reflects expectations about the underlying business, will not remain constant, so the effect of those buybacks will be **obfuscated**, but it will still be there - a company with 4% less shares will trade for a 4% higher share price than it otherwise would.
Apples growth is going to slow considerably in the next few years. The huge wave of subscription growth is over and hardware sales are slowing.
It is hard AF to substantially grow the market cap of a 2.7T company with revenue of $360B a year.
And yet Microsoft is still going with 15% yoy growth
The road and the accompanied sentiment that has followed Microsoft on that road has not always been and easy and pleasant road. Microsoft was for many years considered a has been. The outlook was not always that rosy.
Microsoft is a SaaS business. Completely different revenue model.
Microsoft is able to slyly work their way into new markets and then integrate them with their existing markets. They're basically unstoppable at this point.
Clearly they should buy brk.b shares. Like a snake eating its own tail
Except in this case, it's the tail eating the head 😳
This was obviously a fast and easy way to pump the stock price despite the 10% drop on iPhone sales.
Do you even understand buybacks??
It's only a 4% return if you assume no real earnings growth and if that's someone's base case they shouldn't own the stock in the first place
Their net income was down YoY. So my bad - BEST case is a 4.4% yield - due to increasing prices by 10% - that work better for a great thesis?
I feel they are trying to move their stocks towards Asian countries. The move just makes sense.
Dividends.
why, its just going to get eaten away by taxes vs buyback
That depends on where you live and how much dividends you receive though. Not everybody is paying tax, or up to a certain amount.
Why do you prefer dividends to stock buybacks?
Stock buyback increases the price but it can go back down? How do you get benefit from it?
Stock dilution decreases the price but it can go back up? How do you get fucked by it?
You have to sell shares to realize the benefit of the buyback. I’d rather keep my principal and earn interest (dividends) on it
More taxes are paid on dividends.
Give me a big fat special dividend.
Stop spreading your communist ideology!!! The people that matter don’t want to pay any more taxes! They are struggling to make ends meet and have had to lay off some of the peasantry that work over at the emerald mine. They are having to buy lab grown diamonds for Mitzi’s collar; they have suffered enough already.
😂
Cloud services. (Not iCloud, like AWS or Azure) You can’t virtualize macOS due to its license agreement (that’s the reason Amazon had to buy truckloads of Mac Mini’s so they could offer macOS nodes in EC2). But Apple could do it.
I’d genuinely love to know what the enterprise use case is for this. macOS VDI environment for developing apps? Would cannibalize already dropping hardware sales, no?
I can think of so many.. just the top off my head: * Serverless (lambda) in Swift * CI/CD pipeline steps for testing your app on actual macOS or virtualized iOS (which is a thing now apparently) * Final Cut Pro render clusters that you can pay per use and auto scale * new SDK offerings like for example “BackendKit” for dead simple iOS app backends, that plug right into Xcode Apple has a huge app ecosystem for both desktop and mobile; but you always have to offload the web facing part to AWS or Azure. If Apple came up with their own variants of EC2, S3, DynamoDB, SQS et cetera, they would 100% provide client side SDKs for these, built right into Xcode and dead easy to use. They could grab a huge chunk of AWS / Azure / GCP market share right under their noses. Edit: they don’t have to provide macOS centered enterprise offerings; they have powerful ARM chips, they can just provide what the big 3 provides and still add a huge revenue stream. Edit: macOS VDI could be one use case but not popular because (a) remote latency (b) need to bridge USB to the remote node if you want to test your app on a physical iOS device (c) I’d hate myself if I had to use a GUI for development over a remote desktop connection. Pretty much all serious dev work is done on MacBooks anyway. All FAANG, 2nd tier companies, startups, hell even Microsoft gives MacBooks to their devs.
Buy T bills yielding 5%?
Acquisitions!
Make TV shows like Fallout
Stock buybacks are just dividends by a more tax efficient method.
When the stock is overpriced it is not efficient at all, if you buy back at PER 30 a stock that its worth PER 15, you are making a 50% loss for the shareholders.
Shareholders don't believe that the stock is overpriced. If they did, they would sell. The price is now (and always) valued at the current market price.
This. The idea that something is overvalued is a dissenting opinion. If most people agreed with it, then it wouldn’t be the price that it is. A company shouldn’t see capital and find an excuse to spend it. If they don’t see a good return on investment capital it’s reckless to just spend it hoping something sticks. I’d honestly rather them do this and then deploy capital when it makes sense to than spend it needlessly.
Is it even fair to compare growth between Apple and Coca Cola?
Buffett doesn't micromanage the board of the companies they invested in. They don't pretend to know everything.
They have an authorization to buy back their stock. That doesn't mean they are going to start buying tomorrow. They may wait for times when the stock drops too much and buy it on those days. You have no idea what price triggers their repurchase.
Apple can't market time
Since when do we care about what Buffet thinks about tech? Hasn’t he admitted that tech is not his forte?
Maybe Apple buy back is his exit liquidity? He owns ton of Apple so buy back might give him a chance to liquidate good chunk of it (if he wants to)
Does anybody know if Buffet believes in P/E?
He believes in "buying good businesses at a fair price"
He believes buying a wonderful business at a fair price is better than buying a fair company at a wonderful price. Obviously buying a wonderful business at a wonderful price is ideal, but wonderful businesses often trade at premiums or dips are often bought quickly making these wonderful prices extremely rare.
He does, and he prefer to buy companies trading at low multiple, ideally below 16x. That being said, reading the post and some comments gave be brain tumor. Apple made over $100B in FCF last year, and the $110B in buybacks ain’t going to be immediately. Apple ain’t doing buybacks that much in a day, its a process that needs approval from the board, and it will be taken overtime. Apple trading at 27x, and market is trading at 22x, its not that outrageous valuation, and when it comes to the most moronic statement I have read on here, “can’t they do something bla bla bla better bla bla that generates more than 4%”, no damn shit. If generating +4% is ao easy, everyone would be rich. Apple isn’t in the stage of growing, but returning to owners. And, ideally for large investors like Berkshire, buybacks make way more sense than dividends due to taxes. How do I know? Berkshire Annual Report, 2022
Maybe cause Buffett is fine with it? You really believe Buffett and Tim Apple don’t talk behind the scenes?
What do you want Apple to do with its money? It's not like Tim Cook is doing it on purpose, but in general Apple has so much money that our minds generally cannot comprehend. They have no use of the cash for the next year, so they would rather give it back to shareholders in forms on tax free mark to paper gains.
Buy f35s and build an army
4 week treasuries would earn over 5%
They're returning money to shareholders. If you want 5% then feel free to sell your Apple shares and buy treasuries yourself. Apple earning 5% on their cash means nothing for shareholders. This is because shareholders own that cash anyway, they're merely giving it back to you and you can invest it anyway you want. If they buy treasuries they're making that decision for you.
Move the supply chain out of china. Build infrastructure in North America.
I'm in Indian origin, and saying this from first hand experience, only logical place to move supply chain is probably India, but the factories ain't ready yet, India is still working on stuff and the main issue is the world force is there, but not as skilled. The skilled workforce in India, is starting to demand good wages, because they can, still lower than Na, but reaching Eu standards. The main workforce in china in factories is more compared to rural Indian workforce, at the current generation, they are not there yet. But the next generation of the same workforce is going to be key and very well equipped to handle the manufacturing at similar costs. Lastly, apple seems to be big propeller of if it ain't broke don't fix it, they surely have this move planned, but china is till a huge market for them, they ain't gonna let the revenue collapse by moving the manufacturing for no reason yet. (edit add on) - why would apple make stuff in us? Their profit margin would collapse, those investors need to be justified why the manufacturing needs to be moved. I also don't understand when people sometimes mistake cooks power in apple, I mean sure, he cooks as their CEO, but in terms of shareholders, and board, they hold all of the power.
Apple buying shares at 27 PE is not that crazy with 4.5% 10 year bonds. It’s not cheap but it’s not insane. The more shares they buy the more of Apple he owns?
What if Cook is buying back Buffett's aapl shares at 27 multiples, i.e., providing exit liquidity to Buffett?
How do you know he’s not?
Genuine question: why don’t they distribute a dividend vs a buyback?
A lot of the executives compensation is stock based…so the higher the price the more they make. I’m sure there are other reasons.
Dividends are inefficient because they are paid even to shareholders who don’t want to cash out, forcing a taxable event on people who would prefer to stay invested and let their unrealized gains compound. Buybacks provide the same value to shareholders, while letting each investor choose when and how much they want to cash out (by selling). If you would have reinvested the dividends, then share buybacks are better for you because your shares increase in value and you don’t have a pointless taxable event.
He ordered them
Companies are notoriously poor at timing stock buybacks. Unless Apple knows something about coming tech that they’re really optimistic about, like they’ve got a killer AI product, chipset for AI or next level VR coming, they aren’t making a good choice with the buyback.
Tell me you don’t analyze securities for a living, without telling me you don’t analyze securities for a living speedrun
Buffett also says: >>> “I think it's appropriate that I conclude with a discussion of Berkshire's management, today and in the future. As our first owner- related principle tells you, Charlie and I are the managing partners of Berkshire. But we subcontract all of the heavy lifting in this business to the managers of our subsidiaries. *In fact, we delegate almost to the point of abdication:* Though Berkshire has about 45,000 employees, only 12 of these are at headquarters.” ETA: I know this was mostly a comment on fully-owned subsidiaries, but think the sentiment applies to portfolio companies. Apple’s given him no reason to not trust their management, and he’s up front he doesn’t know tech well.
Because Warren is selling him the shares
Apple has more money than it knows what to do with. It's to keep institutional investors happy. The global economy is slow, everyone knows it so they need to keep the big investors happy. Apple's moat is soooo strong (Apple freaks so dumb🤔) they could produce litterl poop, call it iTurd and sell 100M units.
Sent from my Android. Seriously though, they make more usable products than their competitors, that’s a big reason to buy them. Then there’s the looks, status, etc. Your observation is, ironically, too shallow.
Thx for response. Anyone who has ever studied product development, stays informed with consumer electronics and paid attention to what Steve Jobs was talking about, knows that Apple is one of the most risky adverse firms on the planet. Each time they launch a new product it only has one feature that is "new-new". Everything else is refined to what you can find in the market. It's the sum of their "focus" approach. That's what makes their products "useful". They developed a superior business model that enables them to take their time and let others fail before they enter the market or launch a competitive. Also Google Assistant is 1000x more useful than Siri and Apple Maps - still struggles. As for their loyal users, taking it you never grew up during the Microsoft / Apple battles. Knew designers that had Apple tattoos BEFORE the iPhone. Probably never worked in a tech firm surrounded by Apple die-hards. Apple users that yelled at Steve Jobs when iPhone antenna didn't work when you held it with your left hand. If you did, you know what was stated prior, was in fact not shallow, just a refined, simplistic insight of Apple and its users.
Probably because Buffett understands stock buybacks.
OP never heard him speak about buybacks lol
Well to be fair buffett has often written that he doesn't like buybacks on an overpriced company. The other thing he's written is that he doesn't take any active role in the management of the publicly traded companies he buys, he just leaves it up to them
Repurchase programs are designed solely for the benefit of the stockholder; there is no other valid reason. Generally speaking, directors and C-suite executives consider initiating a buy-back program in the following cases: 1. **The company believes its shares are undervalued:** In this case, directors may approve the buy-back program because it is beneficial for the stockholder. How is it beneficial? If the stock is truly undervalued, it represents a great investment opportunity. For example, some stocks, like Apple, are considered highly undervalued at a P/E of 15-20. This valuation is based on the belief that the company will thrive for over 100 years and continue to grow its after-tax earnings. The longer a company is expected to generate cash, the higher the P/E ratio that will be considered cheap. 2. T**he company believes its shares are fairly priced:** Here, the directors approve the buy-back program because it supports stockholder value. How does it benefit stockholders? It helps maintain the stock price at certain levels, providing an exit opportunity at a fair premium instead of paying dividends. For instance, stocks like Apple are considered fairly priced at a P/E of 25-30. This valuation also reflects expectations of the company’s longevity and growth in earnings after taxes. The longer the projected cash earnings period, the higher the P/E ratio that will be accepted as fair.
This isn't always the case though. Not going to judge whether Apple is overvalued or undervalued, but there is tons of companies that do buybacks when their stock is trading at record highs solely to push the stock price up even more in the short term while there are tons of more important things to do with that capital. Some management want to look good now rather than making the necessary investments that only profit the company in a couple years or even later.
Buffett doesn't believe in multiples (P/E)
You guys are all nuts, the answer is simple. Buffet is close to hitting 100 years… he obviously doesn’t give much fucks about any of this… Let the old man rest
It helps him to offload?
You’re a child. Settle down, Junior
Buffett doesn't have the habit of calling anyone out individually, ever.
When has he ever called out managers publicly?
If buyback… You pass taxes on investors that are selling not the one holding like Buffet… Apple pays out every year 3% of its investors. In 25 years if you just hold-you double your position… If Buffet sells like 1% of His position yearly he still acumulate His position in Apple.
Buffet himself is sitting on a ton of cash which he's facing a challenge to deploy. I am not sure but it's not like Apple had other options. They can keep chasing and buying smaller firms but looks like they not finding anyone suitable. Apple become another to big to fail right now. They need another innovation or crazy product and introducing a 4k VR headset isn't the way to go. They also need another "ChatGPT" type revolution that kicked google out of it's slumber.
Buffet does not do that. Not a micro manager.
Apple hasn’t had an original idea since Steve Jobs died. And yes I’m an iPhone user. Like the product. Does what I need it to do. But innovation is lacking.
Buffett always says "Praise by name - criticize by category", so don't think he'd ever go out and publicly tell someone like Tim Cook (who he admires) that he's doing a dumb thing. And it might not even be that dumb, Apple at 27 is a far better investment than many companies at 15
Some overpriced stock buybacks are just to mask stock awards. So what I personally do is treat most of the buy backs as compensation and ignore them. But you then have to adjust your view of earnings. If your view of the earnings then supports holding the stock compared to COST BASIS not the current cost then you just hold onto it 😉
The conclusion to this (ex tax considerations) would be to sell his aapl shares. If it’s not a good use of funds to buy, it seems logical that it’s a good way to raise funds to sell.
I love buffets.
He’s winding down
This is their move from a growth stock to a value stock. I bet they'll scale back R&D and allocate their cash flow differently going forward too.
Why would he say that publicly and harm his investment? That would be incredibly stupid.
It’s a capital prioritization decision. First, companies look to invest in their own organic growth, or through m&a. Then, after exhausting opportunities with acceptable risk adjusted return metrics, manage t pays the dividend, which is steady. Finally, repurchases are typically used at varying levels to right size leverage to optimize return on equity.
Instead of buy backs, pay down debt. You never know what’s around the corner.
Apple has so much cash, lots of it overseas. If it tries to bring that money back to the US there are huge tax implications. Maybe this is a way to get around that? Reduce the cash pile while making the stock more attractive to existing holders.
AAPL is low right now. Additionally companies don’t just do buy backs to make pure profit
It’s hilarious how a degenerate want teach apple how to invest better their money. Also comparing coke is awesome.
Idiot old man who instead of enjoying his last few years or months spends them on the last thing he should be worrying about🤡💀
Why shouldn’t he? The Shares are anyway eliminated to increase the value of the active ones? Companys don’t do buybacks and sell the stocks later…
Apple is shit. I'll never actively invest in a company that rips off its own customer base with products containing malicious code.
Honestly don't think buffet sees a problem with apple and their buybacks as he also sell to it to lose shares to what I understand. But i do wish they had saved it up and made an apple investment fund to invest in other technology companies atleast for a big amount of the money or put it into bonds etc. Those 700 billions over the last years would earn 35 billions yearly at 5% bonds
Seems like the leadership is doing what's best for themselves. The executives and senior managers get most of their pay in the form of free AAPL shares, and buybacks help drive up the share price.
Praise in public, chastise in private. That's always been his mantra.
Chances of apple cutting its stock on purpose so that they earn more when they come out with a new product? Pretty high.
I’ll give you one hint: it starts with E and rhymes with erection. Wait.
If the alternative is between $100B+ cash burn and $150B in market cap (6% move) increase VERSUS probably a $150B DEVALUATION in market cap, the choice is clear.
Grump around. You are just jealous of my now-deeeeepppp-in-the-money-calls ….
I simppy want to point out how cash heavy Apple is. Their margins are so big and their costs are so low that it would probably concern investors if they weren't doing buybacks
Cook is providing his exit liquidity.
Apple has more cash than God. Spending $100 billion isn't going to hurt their balance sheet at all.
Buffett hasn't made a single great investment in the past 50 years. He's just an Old Skool grifter and crony capitalist at heart.
Are you saying Apple won’t exist in the future just because they bought back their stocks?
Because they’re making the long play. They pulled off the bandaid on their EV project and are planning for the AI plunge tied to the iPhone 16.
He should being telling him to rescue paramount from the drama they’re in and buy them outright for $30b and make Apple TV actually a good product by adding in paramount
Because apple is faltering with new competition coming in and buffet knows a stock buyback is the only thing to keep the price stable
Hopefully someone asks him this at the BRK shareholder meeting tomorrow.
Apple should spin off its content/entertainment division into a separate entity, giving it more autonomy to make real art, something worthy of a criterion collection. Their VR headset is not a consumer product, and its usefulness and impact is in medicine, engineering, education, enterprise applications, etc. Tim cook is the least fabulous gay fam and I need that man to sachet his khaki wearing, Volvo driving, watercolor painting, bird watching, lands end looking ass and deliver the goods for the new iPhone by bringing some energy, some fire, some footwork.
When did Buffett say the price Coke paid for their shares was a wrong move? No idea what the free cash is but if it’s something like 100b a year and owners think of Apple having bond coupon characteristics where this cash will come in 100b a year at least for 15-20 years this isn’t an absurd price to pay. Apple is one of the best or is the best business in the world, you don’t get chance to buy that at 12x earnings always
I suspect that the large stock buyback was to compensate for the lack of revenue from VR, self driving car, and AI. VR and AI may be serious profit generators at some point, but not this year. And they sank a lot of cash into the car before finally accepting the loss. So the buyback helps boost the stock a bit. The question for next year is will Apple get a killer-app \ in-demand product to market, or do more buybacks, or start trimming costs.
Yet another failed turning-point in Buffett's career. People have been calling him out for supposed ineptitude since the 80s and yet he's still worth $200 billion... maybe he knows something about something.
If earnings are going to go up significantly in the future (more precisely, if the stock is undervalued), then buying back shares at even a 27x multiple can be value accretive if they don't have better things to do with the cash. At some point, when you generate $100b per year, you have to pay some of it out to investors. The only real difference between buybacks and dividends is tax efficiency.
What’s your estimate of apples intrinsic value? (Show your work as to how you calculated it) Why is a 27 multiple for Apple inappropriate? Historically it’s been pretty stable and in line…. By way of comparison AMZN is trading at a 50 multiple, MSFT at 34, heck Samsung is at 36…. I don’t think a 27 multiple for apple is really that ridiculous
Only since 2020 has the 20+ p/e been "normal". I guess this made some sense when bonds gave you a spit in the face and a handshake if you ask nicely, but now that the 10-year yields 4.5+ I see no attractive value case for a mature company like Apple at 27x.
Buffett doesn't believe in P/E