Share Buyback Time for Apple

A blog about business and economics.
March 12 2013 3:01 PM

Does Apple Think Its Stock Is Cheap?

Apple CEO Tim Cook poses with an iPad Mini on Oct. 23, 2012 in California

Photo by KIMIHIRO HOSHINO/AFP/Getty Images

Gina Chon claims that, "according to sources," Apple will announce an increased dividend or share buyback program this spring, pre-empting criticism from David Einhorn and others that it's not doing enough to return cash to shareholders.

That sourcing is a bit hard to interrogate. But if Apple does decide to disgorge some cash, it seems to me that a share buyback is much more likely than a dividend. The reason is simple: By any conventional metric, Apple stock is very cheap right now. That doesn't mean Apple's a good buy. The cheapness may well illustrate warranted pessimism about the company's future. If you think that Samsung is going to eat iPhone's lunch over the next three years and Google Glass will be the next big thing, then Apple's super-low price:earnings ratio is no reason to buy the stock. But presumably Apple executives don't think Samsung is going to wreck the iPhone business or that Google Glass is the next great disruptive consumer electronics product. And there's no getting around the fact that Apple stock is cheap right now. If you're even moderately optimistic about the company, then buying AAPL looks like a great buy right now.

If Tim Cook doesn't see any large acquisitions out there right now that make sense, then acquiring shares in Apple itself is going to look like a solid bargain, and that's what the company will probably do.


All that said, it's far from obvious to me that Apple actually will do what Chon says. Nobody is really in a position to force Apple management to pay cash out to shareholders; the huge stockpile of cash is a nice cushion for management; and the plan of hoping Congress enacts a corporate tax break of some kind in the near future seems reasonable enough to me.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Frame Game

Hard Knocks

I was hit by a teacher in an East Texas public school. It taught me nothing.

Chief Justice John Roberts Says $1,000 Can’t Buy Influence in Congress. Looks Like He’s Wrong.

After This Merger, One Company Could Control One-Third of the Planet's Beer Sales

Hidden Messages in Corporate Logos

If You’re Outraged by the NFL, Follow This Satirical Blowhard on Twitter

Sports Nut

Giving Up on Goodell

How the NFL lost the trust of its most loyal reporters.

How Can We Investigate Potential Dangers of Fracking Without Being Alarmist?

My Year as an Abortion Doula       

  News & Politics
Sept. 16 2014 9:22 AM The Most Populist Campaign of 2014
Sept. 15 2014 7:27 PM Could IUDs Be the Next Great Weapon in the Battle Against Poverty?
Atlas Obscura
Sept. 16 2014 8:00 AM The Wall Street Bombing: Low-Tech Terrorism in Prohibition-era New York
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Tv Club
Sept. 15 2014 11:38 AM The Slate Doctor Who Podcast: Episode 4  A spoiler-filled discussion of "Listen."
Brow Beat
Sept. 16 2014 9:13 AM Clive James, Terminally Ill, Has Written an Exquisitely Resigned Farewell Poem
Future Tense
Sept. 16 2014 7:36 AM The Inspiration Drought Why our science fiction needs new dreams.
  Health & Science
Bad Astronomy
Sept. 16 2014 7:30 AM A Galaxy of Tatooines
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.