Gavekal Capital: Apple: Can't Buy My Love

Thursday, April 24, 2014

Apple: Can't Buy My Love

Yesterday Apple announced a whopping $90 billion stock buyback, to be completed by the end of 2015. This means they will be buying roughly $45 billion in stock this year and next. By way of comparison, this is $5-7 billion more than earnings that are expected this year or next. So, Apple will be using over 100% of its earnings to finance stock repurchases.

Analyst Earnings Estimates

What would we rather see Apple do with the money than buyback stock? The short answer is that we would prefer to see them accumulate more long-term (productive) assets. Of the technology hardware companies, Apple has smallest proportion of its assets represented by intellectual property and long-term assets.

Balance Sheet Ratios

The stock has been in a relative strength downtrend since the middle of 2012 and has recently popped back up to the downtrend line. We will be watching how this chart evolves in the months to come.

For now, investors seem to be indicating that Apple can't buy their love and they want to see new products drive earnings, taking Apple's expected earnings growth up compared to its peers.

Analyst Earnings Estimates

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
We offer the Gavekal Knowledge Leaders Strategy in multiple products for global investors. For more information about our product offerings please visit http://www.gavekalcapital.com.
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