WSJ: Apple lost $9 billion overpaying for itself

From Michael Rapoport and Theo Francis’ The Investment That Cost Apple $9 Billion in 2018, in Friday’s Wall Street Journal ($):

Like many large companies, Apple has used much of its windfall from the 2017 tax overhaul to buy back shares. But the recent plunge in stock prices has made that look like a bad idea. Apple and companies including Wells Fargo WFC -0.13% & Co., Citigroup Inc. and Applied Materials Inc. AMAT 2.97% repurchased their own shares at rich prices, only to see their value decline sharply…

Apple, one of the market’s biggest repurchasers, spent about $62.9 billion on buybacks in the first nine months of 2018, according to securities filings. But the selloff has weighed on its shares.

The company’s repurchased shares were worth about $53.8 billion as of Wednesday’s close, some $9.1 billion less than it paid for them. Apple repurchased shares at monthly average prices as high as $222.07, according to securities filings. The stock closed at $157.17 Wednesday…

“Apple makes iPhones. Timing the market is not what they do,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Companies that try to time the market in buying back shares “are going to be in the red at times.”

My take: What Silverblatt said.

See also: Look who’s buying Apple

22 Comments

  1. Horace Dediu said:

    The shares Apple bought no longer exist therefore they can’t be priced. The author is making very basic mistakes.

    12
    December 27, 2018
    • Gregg Thurman said:

      The author is a paid “journalist” that is compensated for the amount written that translates to eyeballs.

      A job like that doesn’t require (in fact it is better without) research or accuracy.

      3
      December 27, 2018
    • Alan Birnbaum said:

      Great game; useless commentary by the ‘journalist’ (aka paid blogger with ‘clickbait’ articles!!!

      Waiting for Horace’s next article !!!!!

      2
      December 27, 2018
  2. Jonny Tilney said:

    Journalism in 2018: SNAFU.

    2
    December 27, 2018
    • Gregg Thurman said:

      From the article referenced in your link:

      “AAPL remains a bargain by our way of thinking as our long-term Target Price is close to $750.

      That’s $750 pre-split or $107 today.

      Michael Rapoport and Theo Francis are hacks peddling crap.

      3
      December 27, 2018
  3. Fred Stein said:

    Apple is not “Timing the market”. Silverblatt cherry picks the timing to make (or fake) a point. For the entire buyback program, Apple’s cost basis looks good. Apple’s increasing EPS over the last 2 years or 5 years or 10 years looks great. The stock price is just a mood ring (remember them?)

    Apple buys AAPL because the future cash flow provides an outsized return on invested capital. Even shares purchased at the peak, provide nearly 8% return.

    Apple buybacks ensures healthy increases in dividends for years. This in turn, ensures protection against potential inflation, and concomitant interest rate, risk.

    4
    December 27, 2018
  4. David Emery said:

    This is an implicit argument for Apple to manipulate its stock price to support share buybacks at an “optimized price.” WSJ should be ashamed of itself.

    3
    December 27, 2018
  5. George Row said:

    Shock news “WSJ discovers that Every silver lining has a cloud”!

    3
    December 27, 2018
  6. Aaron Belich said:

    Perhaps a grass roots campaign publicly shaming these “Journalists” on Twitter might raise more eyebrows. Thoughts?

    1
    December 27, 2018
    • David Emery said:

      I’m sorry, but I just do not take -anything on Twitter- seriously. But I guess I’m in the minority.

      1
      December 28, 2018

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