If profits and revenue are dropping. Isn't that an indication of harder times? Shouldn't they be saving money right now to invest more in their R&D to tide this over and continue growing?
Also Apple doesn't have a cash issue. Companies that need to think about liquidity are those on the verge of bankruptcy, which isn't the case here. There's sufficient cash (from the Balance Sheet but also from Operating Cash every year) to fund R&D at Apple. Heck, if you divide their annual R&D spend ($29B in 2023) by the cash sitting on their balance sheet ($148B in 2023), they have enough cash today[1] to fund 5+ years worth of R&D without selling a single additional iPhone during that time
Buying back stock when the price drops is just taking advantage of the current situation to return capital to investors "cheaply".
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[1] Technically today = September 30, 2023, when they reported their 2023 10-K, if we're being pedantic. Both cash and R&D figures from that 10-K available here:
Ctrl+F "$148.3 billion as of September 30" for the cash balance and "Research and development" (there are multiple matches) for the $29B in R&D
Doing this buyback is an indication that the roic is not great enough and deem it better to give it back to shareholders. Huge acquisitions are neither easy or cheap, cheap in the sense of not only the multiple you are paying but also the costs downstream of having to take over that company.
Sony and Apollo Capitol 'expressed an interest'.
BigCorp buys BigCorp deals seem to be about consolidating the market to 1)reduce competition 2)raise prices 3)kill jobs = a)raise bonuses b)promise a higher stock value. Also synergy.
We'll get a pre-merger announcement about creating new jobs; biz media everywhere will excitedly amplify it.
Typically, the DoJ can't rubber stamp these deals fast enough but sometimes they balk - or at least pretend to.
Edit: I see the gap now with your question. The buyback plan/funds are not executed all at once. A company approves amounts to be used for buybacks and then it happens over time. My point is that these buybacks are pretty normal for apple. You can look at Apples historical buyback plans and I think the last announced one was a year ago for $90b.
2018 - $100b
2021 - $90b
2022 - $90b
2023 - $90b
2024 - $110b
Is it a large? Yes. Is it out of the normal for them? No. It is also not especially a difficult reach when looking at their existing cash/security balances and FCF.
That is precisely what a stock buyback is. They could invest that cash on the open market, or return it to investors through dividends. Instead this sends it to the common pool to fund current business operations.
This returns money to investors just like dividends do (but it's better tax-wise).
Not really, it only helps to prop up the stock price. It has no effect on actual yield the way dividends do.
- Buybacks are more tax efficient
- Buybacks can be a signal that the company thinks its current market price is undervalued.
- Can increase control to existing shareholders.
Say a company has 10 shares @ $10/share, w/ a total value of $100. The company has $10 to return to shareholders because it can't make better use of the money internally.
----Share buyback example------
- company buys back 1 share @ $10
- the company's value is decreases by $10 for having distributed the cash
- company now has 9 shares of stock at $10/share, for a total value of $90
-----Dividend example-----
- company distributes $1 to each shareholder
- the company's value is decreases by $10 for having distributed the cash
- company now has 10 shares of stock at $9/share, for a total value of $90
Individual investors get three options they can some shares and maintain the exact same percentage of the company making this equipment to a dividend, they can liquidate more shares which a guaranteed buyer propping up the price, or they can avoid selling shares and simply own more of the company. The final option is more tax efficient because there’s no taxable event unlike a dividend where you pay taxes before buying more stock.
It's effectively a dividend with different tax implications