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?
It's an indication of harder times in the past, not in the future. Management has specific information about what the future holds that we as investors do not
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
I saw in the news yesterday that someone was looking to buy Paramount for $26B or thereabouts. I hope they at least went through the thought exercise of whether this builds more value than five huge acquisitions that could strengthen their offerings.
>Shouldn't they be saving money right now to invest more in their R&D to tide this over and continue growing?
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.
airstrike|1 year ago
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".
---
[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
infecto|1 year ago
aczerepinski|1 year ago
amne|1 year ago
edgyquant|1 year ago
ramesh31|1 year ago
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.
ragazzina|1 year ago
This returns money to investors just like dividends do (but it's better tax-wise).
shawabawa3|1 year ago
It's effectively a dividend with different tax implications