tim_cook_redchair

Asa Mathat

General


When Apple shares cratered after last month’s earnings report, CEO Tim Cook saw an opportunity and engaged in an unprecedented buyback, scooping up $14 billion in shares over the past two weeks.

In an interview with the Wall Street Journal, Cook said that the company was surprised by the drop and wanted to be “aggressive” in seizing the opportunity.

“It means that we are betting on Apple,” he told the paper. “It means that we are really confident on what we are doing and what we plan to do.”

An Apple spokesman confirmed the stock repurchases, but didn’t comment beyond Cook’s statements to the paper.

Apple’s buyback comes ahead of a shareholder meeting at the end of the month and amid calls by Carl Icahn for Apple to do more with its gigantic cash holdings. Icahn has amassed more than $3 billion worth of Apple shares.

Cook told the paper that the company isn’t philosophically opposed to buying a big company, but nor is it just making a list of ways to spend its $160 billion in cash. Apple makes lots of acquisitions, but they tend to be of the small or tiny variety, with none over $1 billion.

“We’ve looked at big companies,” he told the Wall Street Journal. “We don’t have a predisposition not to buy big companies. … We have no problem spending ten figures for the right company, for the right fit that’s in the best interest of Apple in the long-term. None. Zero.”

Update, 7:12 pm PT: In response to Cook’s revelations, BTIG analyst Walter Piecyk said he was raising his expectations for per-share earnings and hiking his price target on Apple’s stock.

“In light of Tim Cook’s statements that the company purchased $14 billion of stock in past two weeks relative to our estimate of $5 billion, we increased our Fiscal 2014 EPS estimate by $0.56 to $41.56 and our Fiscal 2015 EPS estimate to $46.00 from $45.00,” Piecyk said in a research note. “As a result our price target increased to $552 from $540 based on 12.0x our new Fiscal 2015 EPS estimate. Our estimates could rise further based on additional disclosures of share repurchase activity. We expect share repurchase activity to step up to $10 billion per quarter in Fiscal 2015.”

Meanwhile, an updated version of the Wall Street Journal piece quotes Icahn as concurring with Cook’s optimism for Apple.




6 comments
erk.mobi
erk.mobi

Good move, good move! Whenever AAPL is bearish, I always think of it as a moment engineered for buyback.

U.I.
U.I.

mknopp, I only partially agree with you. It is true outstanding shares are a sort of loan. But it's a loan that isn't paid back while the company exists, it bears no interest and can't be redeemed unless the company decides so. So, normally a company would want to sell as many shares as possible (at the best prices possible) to pour cash in for virtually nothing. Icahn is no dummy (and that's really an understatement). He is trying to get Apple to buy because thats the only leverage shareholders have, they can influence company decisions (if you spend several billions to have enough of a say).


But I agree with your support of buying back shares for a different reason. With a company so rich and profitable, its really a sort of insider trading. Apple is very secretive about the future. Only they know what they have in the pipeline and the timing, an i-watch? i-tv? An i-lunar habitat (only joking about that one, really...).


They can project where they will be in 1 year, 2 years or 3 years, buy cheap now and sell dearly once limitation is over. By all accounts stock is ludicrously low when you consider the profit this company makes. Basically it's the second or third most profitable company on the planet. Maybe Cook is looking at something like this:


Closing price on Apple shares Jan. 3rd 2007 - 85.73$ (rumours flying about federal prosecution due to option scandal, projection Apple is doomed, and some trading is done at close to 70$)

Closing price on Apple shares Dec. 3rd 2007 - 198.08$ 


What happened in the middle? A little something called I-Phone.


And now? Apple shares falling 7% (a little more after trading) while profits are huge. Everyone calling Samsung the phone market winner while Apple makes far more profit than they are. Sounds familiar?


Only difference is now they have a huge cashpile to play with (they didn't in 2007), so Cook pulls out a checkbook and says, let me have some of that stock at this price. And MJoseph will happily sell it to him, and then curse in 12 or 24 months time when that stock, sold at around 517$ may reach over 750$.


And it's totally legal for him to buy back his companies own shares (subject to some limitations on selling them after).


I can bet you that when Cook spent 14b$ he wasn't planning on reporting a loss to the stockholders in 12 or 24 months time.


mknopp
mknopp

Hey Carl, you are losing. Better buy some more Apple stock now.


@MJospeh: Why exactly do you think that Apple is doomed because people are selling Apple's stock? Sometimes I wonder if people realize what stock really is? A company doesn't have to have stock to be successful. In fact, a truly successful company should be buying back their stock and reducing the amount of stock available. Stock is basically a type of loan. It is a way for a company to raise capital. Therfore, for a company that is making billions of dollars a quarter there is no reason for them to need to sell stock and every reason for them to buy back stock (IE paying back that loan). There are tons of very successful and profitable and thriving businesses in the world that don't have any stock and are not publicly traded.


Personally, I think this is a brilliant move by Tim Cook. Apple's stock fell when it should have went up. Tim is simply taking advantage of Wall Street's idiocy. If he keeps this up eventually Apple will either drive their stock back up, overcoming Wall Street's stupidity, or they will buy back all of their stock and the analyst and Wall Street stooges can sit and spin.

MJoseph
MJoseph

People dumping their apple stock ;) its nothing but downhill from here. It was nice knowing you apple.

Sandy101
Sandy101

@MJoseph  Are you an Apple investor or you just like to make snarky remarks?

MJoseph
MJoseph

@Sandy101 @MJosephNot an investor., but was giving 2000$+ worth of stock back when it was at 6$+ for a project.

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