A place for Apple traders and investors to share their best ideas -- Christmas week edition.
To get this rolling, here's Daring Fireball's John Gruber making a rare appearance on CNBC to say some sensible things about Apple silicon.
Below: Apple vs. the S&P 500 (normalized)…
Disclosure: Although I am now an Apple shareholder (see Why I bought a share of Apple, my first), I am in no position to give trading advice. Don’t blame me if you drain your IRA doing something you read about here.
See also last week’s trading strategies.
All this ensures top line growth and margins, which is NOT fully priced in.
Like all strategies mine is being helped along by AAPL’s performance. Tuesday last I sold the contracts I bought on Monday ($1.65) for $1.93. Then reinvested in new, higher strike Spreads at $1.50 and sold them for $1.91.
Speculating here, I can see these radios ending up in all kinds of diverse products from HomePods to Macs.
“ Exposing Apple Mini M1 SoC” dated 11/27/2020 and “ Probing the Apple M1’s Hidden Depths” dated 12/16/2020.
Quote:
“ The 1st product from Apple’s chip design team meant for the personal computer line surpassed many competing microprocessors & nearly everything currently in other Apple products, particularly in single core & GPU tests. “
Buybacks will continue – similar pace going forward – $79 B inching down at $5-10 B/qtr – cadence & ability to inch it up is dependent on how business is doing – Analysts predicting +15% in revenue in ’21 &, +5% in ’22 due to more difficult comp – he suspects 10-15% [in ’22] – Growth depends on underlying business – digital transformation has incredible things going on – bodes well for revenue and capital return – Apple is producing so much cash it’s hard to “inch up” – growth rates will be better than most people think – the buyback and dividend amounts will increase because Apple has inexpensive debt – Apple wants to return cash but it’s hard to do so – Buybacks are an under-appreciated part of the stock – envisions Tim Cook as below the fold with a screwdriver slowly turning the screws [so the stock inches higher] – it’s hard for Apple to give back stock fast enough and thus get to net cash neutral, so when they report their March quarter we’ll see another increase in buybacks and dividends.
I think Apple will increase the amount of the buybacks and dividends, but I’m not convinced they’ll do enough of an increase to substantially increase the pace to the “$5-10 B/qtr cadence” he speaks of. Taking a $5 B/quarter reduction in net cash, which I still think is too high, to take $79 B in cash down to neutral cash vs debt, it would take (79/(5×4=) 4 years. Presently, Apple is buying back about $17.5 B/qtr of their float. If net income increases, as I expect, by 20%, then just to maintain their present rate of drawdown they’d need to increase their “cadence” to (17.5×1.2=) $20 B/qtr. But I can’t remember the last time Apple increased dividends by 20%, although they did increase buybacks dramatically when the tax on repatriated earnings was substantially reduced a couple of years ago.
In addition, Apple is limited in the amount of stock they can buy back per session. It’s a percentage, and I believe it’s around 20-25% of the volume. But I’ve never heard of them buying back that much of the total volume. And if they did, it would, needless to say, tend to drive up the stock price, which in turn means that they’d buy less shares for a given amount.
Bottom line: I think Apple is going to have its hands full just getting to net zero in 5 years. And after that, if Apple keeps growing, the coffers are going to need to be kept at net zero, and all that cash has to go somewhere….