Tag Archives: Despite Apple

Business, Finance, Occupation & Industry

3 Mind-Boggling Facts for Apple Bulls

Leave a comment

By Daniel Sparks, The Motley Fool

Filed under:

Apple was slammed last week, with shares sliding more than 4%. In fact, the stock came just $0.68 from its 52-week low on Friday. Though the stock has regained some ground this week, there’s no denying that Apple has taken a beating since its September 2012 high around $700 per share. At these levels, the stock has officially entered value-investing territory. Three metrics, in particular, paint a mind-boggling picture of a severely undervalued, highly profitable stock.

Share of profits
Though Apple‘s three-month average market share of smartphones in the U.S. was up sequentially in February 2013 compared to November 2012, according to comScore, the company is undoubtedly losing market share on a year-over-year basis. Apple’s share of U.S. smartphone sales in the three-month period ending February 2013 declined to 43.5% from 47%. Meanwhile, Google‘s Android picked up the slack as its market share rose from 45.4% to 51.2%.

To be fair, Google’s Android is a free mobile operating system, or OS, that is available to any smartphone manufacturer. Nevertheless, Apple’s share of sales is declining.

This is where the first mind-boggling metric comes in. Though Apple is losing market share, its share of profits remains enormous. In the fourth quarter of 2012, for instance, Apple grabbed 72% of worldwide handset profits, according to Canaccord Genuity. Even more notable, that 72% of worldwide profits was achieved on just 21.7% of sales.

Market growth
Bears continue to line up to throw tomatoes at Apple, but no one can deny the enormous and fast-growing markets that Apple operates in. “Gartner expects the smartphone market to essentially double from 2011 to 2014, so Apple could see tremendous revenue growth even if it only grew at the market rate,” Morningstar analyst Brian Colello pointed out. Furthermore, tablet shipments are expected to grow by 70% in 2013 compared to 2012, according to the IT research company. Gartner also projects a sustained upward trend in sales, growing by 32% annually between 2012 and 2017.

FCF yield
Despite Apple‘s massive share of worldwide handset profits and a spectacular market outlook, the stock trades at an unjustifiably conservative valuation.

In a recent article, I compared Apple to slow-growth megacap stocks, including McDonald’s, Wal-Mart, Microsoft, and Intel, using the free cash flow yield — a great indicator of a stock‘s value. Of these four companies, the only one with a free cash flow yield as high as Apple’s (the higher it is, the cheaper the stock) was Microsoft — a company with stalling growth, whose Windows-based PC sales continue to decline. Apple’s FCF yield of 11.3% was more than twice as high as Wal-Mart’s and McDonald’s FCF yields, and 400 basis points higher than Intel’s.

Keeping the faith in strong fundamentals
It’s easy to point fingers at CEO Tim Cook or to criticize Apple for lack of innovation, but there is no denying the cash the company is producing. With indisputable leadership in terms …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

When Will Apple Boost Its Dividend? Soon.

Leave a comment

By Daniel Sparks, The Motley Fool


Source: SEC filings. Calendar quarters shown. Cash returned includes dividends and buybacks. Chart created by Evan Niu.

Apple must inevitably return more cash to shareholders in the near future. CEO Tim Cook’s statements at the 2013 Goldman Sachs conference again reiterated management’s recognition of its enormous cash pile: “We do have some cash. … And it’s an incredible privilege for us to be in a position that we can seriously consider returning additional cash toward shareholders.”

Topeka Capital Markets analyst Brian White projects that Apple’s cash balance could reach $241 billion by the end of fiscal 2015 if the company doesn’t return more cash to shareholders than it already is.

Apple is a top-notch dividend stock
Though Apple may have fully qualified as a growth stock several years ago, it’s now a top-notch dividend stock. In fact, the stock‘s qualities as an income investment are largely undervalued.

Apple’s current dividend yield of 2.4% may not seem very attractive to income investors. But with a likely dividend increase on the horizon, and given Apple’s enviable ability to generate large amounts of free cash flow, the stock is a first-class bet for future income — especially at today’s conservative valuation.

A key metric income investors care about when analyzing the quality of a company’s dividend is the payout ratio. The payout ratio is simply equal to a company’s annual dividend divided by its annual earnings. The higher the ratio, the less sustainable the dividend if business fundamentals go awry.

Most established dividend stocks have payout ratios well over 50%. Apple’s is just 12%. Microsoft and Intel , two well-recognized dividend stocks in the tech sector, have payout ratios of 45% and 40%, respectively. Keep in mind: The lower, the better.

Another key measurement in assessing the quality of a company’s dividend is a its ability to generate free cash flow, or the cash that can be used to pay out dividends.

Apple has an unearthly ability to turn $0.28 of every dollar of sales into free cash flow. That’s practically unheard of in the consumer-electronics hardware industry. Microsoft manages to do better, with a free cash flow-to-sales ratio of 38%, but this is expected — the company’s primary businesses is selling high-margin software. Intel, despite its market leadership, earns just $0.15 of free cash flow on every dollar of sales — considerably less than Apple.

Apple, therefore, has excellent prospects as a dividend stock. In fact, analysts surveyed by Bloomberg collectively believe that Apple will boost its dividend to $4.14 per share. That amounts to a dividend yield of 3.7% — far higher than today’s yield of 2.4%.

Give us a dividend
There is no denying it. Apple has too much cash. The company will probably make an announcement to return more of it to shareholders soon. This is just one of many reasons the stock is a top pick among my outperform

Filed under:

The one-year anniversary of Apple‘s dividend on March 19 came and passed with no announcement from Apple to boost its dividend. Leading up to the anniversary, there was a lot of speculation around what exactly the company could announce. Though the buzz has faded, it doesn’t mean Apple won’t announce a plan to return even more cash to shareholders. In fact, investors should rest assured — an announcement is basically inevitable.

Some background
Just over a year ago, Apple announced plans to initiate a dividend and share-repurchase program. The quarterly dividend amounted to $2.65 per share. At today’s share price, the dividend yields a 2.4% return to investors. Apple’s share-repurchase program meant repurchasing $10 billion in shares over a three-year period.

Even at the time of the announcement, the payout seemed conservative. But a year later, investor concern looms: Despite Apple‘s payouts, its massive cash hoard — now more than $137 billion — is still growing even larger. Investors want in on it.

David Einhorn of Greenlight Capital made headlines in February, when he proposed that Apple pay out some of its cash in the form of preferred stock. Apple responded with an official statement, admitting that the company has found itself “in the fortunate position of continuing to generate large amounts of cash, including $23 billion in cash flow from operations in the last quarter alone.” The statement asserted, “Apple’s management team and Board of Directors have been in active discussions about returning additional cash to shareholders.”

Why Apple can pay out more cash
If it isn’t clear already, Apple has enough cash sitting around to pay out more to shareholders. In fact, Apple has $145 in cash on its balance sheet for every share.

“The only thing that Apple can’t do is nothing,” Fellow Fool Evan Niu asserted. Apple’s returned only a “sliver of cash” so far.

Evan illustrates his point with this mind-boggling chart.

Source: SEC filings. Calendar quarters shown. Cash returned includes dividends and buybacks. Chart created by Evan Niu.

Apple must inevitably return more cash to shareholders in the near future. CEO Tim Cook’s statements at the 2013 Goldman Sachs conference again reiterated management’s recognition of its enormous cash pile: “We do have some cash. … And it’s an incredible privilege for us to be in a position that we can seriously consider returning additional cash toward shareholders.”

Topeka Capital Markets analyst Brian White projects that Apple’s cash balance could reach $241 billion by the end of fiscal 2015 if the company doesn’t return more cash to shareholders than it already is.

Apple is a top-notch dividend stock
Though Apple may have fully qualified as a growth stock several years ago, it’s now a top-notch dividend stock. In fact, the stock‘s qualities as an income investment are largely undervalued.

Apple’s current dividend yield of 2.4% may not seem very attractive to income investors. But with a likely dividend increase on the horizon, and given Apple’s enviable ability to generate …read more
Source: FULL ARTICLE at DailyFinance

News, Politics, Government

How Siri Could Kill Apple

Leave a comment

By Greg Satell, Contributor

When Apple launched the iPhone 4S in the fall of 2011, it shattered sales records, selling over 4 million units in the first three days. A big part of that success was Siri, the revolutionary new interface which responds to voice commands. It appeared that Steve Jobs had done it again. (This time, from beyond the grave no less!).  Back in the ‘80’s, he had transformed personal computing by introducing the public to the graphical user interface (first developed at Xerox PARC).  Then came first iPhone with its multi-touch interface, revolutionary for its time (but developed by FingerWorks, acquired by Apple in 2005). Now, Apple appeared to be taking it to the next level, with an interface that didn’t require hands at all.  Once again Siri was not only a technological triumph, but a smart business move.  Rather than spend years lavishing billions of dollars on an R&D program, Apple picked up Siri for a reported $200 million.  Even better, the initial research was financed by DARPA.  (Thanks Uncle Sam!) Alas, things were not what they seemed.  In fact, Siri could signal the beginning of the end for Apple. First, the obvious.  When you ask Siri for something, it inevitably sends you to Google.  So while Apple impresses consumers, their arch-rival at Mountain View profits.  Apple has since launched their own maps (not very effectively, I might add), but their only other option for basic search is Microsoft, which wouldn’t be much of an improvement in terms of competitive concerns. Second, even Siri itself is not truly an Apple product.  Much of the critical technology is provided by Nuance Communications, a leader in speech recognition.  So it’s hard to see how Siri gives Apple any competitive advantage at all. Probably most importantly, with Apple’s paltry R&D budget, it is unlikely that they will be able to compete beyond interfaces and devices (and with the launch of Samsung’s Galaxy 4S, even their position there seems to be eroding).  As I wrote in an earlier post for Forbes, a variety of companies, ranging from Facebook to IBM are investing heavily in systems that combine natural language with Big Data. Apple, for its part, doesn’t seem to have any significant artificial intelligence platform beyond the Siri interface and no big data effort to speak of.  If they did, we would know about it.  Despite Apple’s well deserved reputation for secrecy, even they wouldn’t be able to hide hiring the top notch talent that they would need to build a strong artificial intelligence platform.  There’s just not that much of it around. So it appears that Apple is at a crossroads.  They have plenty of cash and leadership positions in both smartphones and tablets, two high growth categories that are far from saturation.  Moreover, their notebook and iPod businesses continue to be wildly profitable.  However, it’s tough to see how Apple will compete 3-5 years from now when Big Data and artificial intelligence become an important part of the consumer experience. As I’ve pointed out before, it’s not …read more
Source: FULL ARTICLE at Forbes Latest