For all those who seem to be inclined to predict Apple’s impending demise, I can give a few hundred billion reasons why such thinking is poppycock at its simplest, pure yellow journalism at its worst.
The reasons? Apple sits on somewhere around $200-billion, give or take a dozen billion or two. Yes, the stock market is in turmoil and Apple has taken a few big hits. If what goes up, must come down is a thing, if what goes around comes around is another thing, then what is down may well rise from the ashes. I’m thinking APPL and MSFT.
So, let’s assume that in these turbulent times Apple’s CFO and other bean counters did what they do. They counted Apple’s beans and came up with a figure well in excess of tens of billions of dollars. What can Apple do with $200-billion in cash that it has not already done?
How about, oh, I don’t know– R&D. Research and development. Nope. Apple is doing that already. How about a major acquisition or two? I’d like to see Apple buy Tesla, but TSLA is selling at a premium and APPL is not.
Apple’s stock is about where it was a couple of times last year (February and April, to be somewhat precise) so it isn’t exactly a stock that is in the gutter. What Apple has done in recent years is to take some of that money and do something that seems nonsensical at first, but might pay off down the road. How so? If what goes up, must come down, then things that are down have the potential to go up.
Apple has given billions to shareholders in the form of dividends, and helped shareholder value by buying back APPL, again, to the tune of tens of billions of dollars. Except not so much since mid-2018 because the stock price was at continuous record levels. The rule is to buy low, then sell high. Not the other way around. Many tens of billions of dollars that Apple earmarked for stock buybacks did not get spent.
When would be a good time to spend it? While the stock was at stratospheric levels? Or, perhaps now, while the stock price hovers around low points from earlier in the year?
Hmmm. Inquiring minds may want to know but any of us can figure out the basic math. Buy low. Sell high.
The trick is to ignore the headlines and pay attention to the math. Harsh Chauhan is a Fool who does not understand the latter:
How This Chinese Company Broke Apple’s Smartphone Domination
The company? Huawei. The domination? Well, except for revenue, gross margins, and profits, Apple has never had an iPhone domination. Huawei sells mostly inexpensive knockoff smartphones. Their CFO is in jail. Western governments have banned many of the company’s products, but somehow they broke the Apple smartphone domination that Apple never had.
How so? Tech and market journalists live in the era of marketshare, the least important of major metrics to determine a company’s financial health.
Apple, on the other hand, doesn’t seem capable of reclaiming its lost spot, as its smartphone sales aren’t growing anymore.
Lost spot? What is the spot Apple lost? The Fool doesn’t say. iPhone sales have been relatively flat for four years, even as the company takes ever more revenue and profits from competitors. Alright, times are tough for all smartphone makers right now. Guess which one is positioned to ride out the storm? The one that sells the most? Or, the one that makes the most money?