Impending share buyback?

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    Posted: 28 February 2012 07:05 PM #16

    huskerrx - 28 February 2012 10:10 PM
    Burgess - 28 February 2012 10:01 PM

    I’m in the pro-buyback camp.

    If apple bought back 10% of shares, the EPS is going to increase by 10%.

    Anyone that thinks this isn’t going to cause a roughly equivilent lift in share price needs to provide a good argument as to why not.

    I think EPS would actually go up higher than the buyback percentage.  A 10% buyback would equate to a 11.1% (roughly smile ) EPS increase.

    good point.

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  • Posted: 28 February 2012 07:11 PM #17

    Burgess - 28 February 2012 10:01 PM

    I’m in the pro-buyback camp.

    If apple bought back 10% of shares, the EPS is going to increase by 10%.

    Anyone that thinks this isn’t going to cause a roughly equivilent lift in share price needs to provide a good argument as to why not.

    Yes a buyback will race earnings per share and it will probably lift the share price somewhat (even after AAPL stops buying back shares), but AAPL will still be undervalued.

    A share buyback is no different then a central bank defending the currency by offering to buy the currency at a predetermined target exchange rate.  In the case of a stock, Apple will buy up outstanding shares and the additional demand that they bring into the market of course will raise AAPL prices.  But Apple can’t keep buying AAPL forever, and once they withdraw from the market, prices go back to ‘normal’ levels.  Now they may be higher than pre-buy back levels but they will still be undervalued because nothing has been done to convince the investors that Apple’s success is not a result of an extended run of dumb luck that can end at any time.  It’s this misconception that needs to be demolished if AAPL is to stop being undervalued.

         
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    Posted: 28 February 2012 07:22 PM #18

    aardman - 28 February 2012 11:11 PM
    Burgess - 28 February 2012 10:01 PM

    I’m in the pro-buyback camp.

    If apple bought back 10% of shares, the EPS is going to increase by 10%.

    Anyone that thinks this isn’t going to cause a roughly equivilent lift in share price needs to provide a good argument as to why not.

    Yes a buyback will race earnings per share and it will probably lift the share price somewhat (even after AAPL stops buying back shares), but AAPL will still be undervalued.

    A share buyback is no different then a central bank defending the currency by offering to buy the currency at a predetermined target exchange rate.  In the case of a stock, Apple will buy up outstanding shares and the additional demand that they bring into the market of course will raise AAPL prices.  But Apple can’t keep buying AAPL forever, and once they withdraw from the market, prices go back to ‘normal’ levels.  Now they may be higher than pre-buy back levels but they will still be undervalued because nothing has been done to convince the investors that Apple’s success is not a result of an extended run of dumb luck that can end at any time.  It’s this misconception that needs to be demolished if AAPL is to stop being undervalued.

    I see a buyback as merely the best way for apple to make use of its current cash to the benefit of its current shareholders.

    “Misconceptions about Apple” has nothing to do with a stock buyback in my opinion.

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  • Posted: 29 February 2012 02:21 PM #19

    My perfect scenario for apple cash is a 1% or less divy (to draw in all value funds) and a $100 billion buy back.  The buy back can be done at anytime by the company.  This will put a floor on the stock and allow the company to wait for a rainy day to buy.  The company will have well over $100 billion after this quarter and will have $200 billion within a year.

         
  • Posted: 29 February 2012 04:02 PM #20

    A share buyback is no different then a central bank defending the currency by offering to buy the currency at a predetermined target exchange rate.

    Apple makes things, banks don’t.

         
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    Posted: 29 February 2012 04:25 PM #21

    huskerrx - 29 February 2012 06:21 PM

    My perfect scenario for apple cash is a 1% or less divy (to draw in all value funds) and a $100 billion buy back.

    Like your scenario so long no actual* buy back is done.  *except for compensating the dilutive effect of EO exercising and RSU granting.

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