Apple Stock Is Officially Cheap -- Tim Cook Just Said So

After a year of sharp sell-offs, Apple (NASDAQ: AAPL  ) stock is up nearly 5% after hours on the company's first quarterly earnings beat in four tries.

The Mac maker reported $10.09 a share in profits on $43.60 billion in revenue. Analysts were expecting $10.07 a share and $42.49 billion, respectively, according to Yahoo! Finance.

Both iPhone and iPad sales came in ahead of expectations, and that's despite increasingly tough competition from Samsung and Google (NASDAQ: GOOGL  ) , among others. Mac sales fell slightly year over year, but nowhere near as much as the 15% PC market downturn that's plaguing Dell (UNKNOWN: DELL.DL  ) and Hewlett-Packard (NYSE: HPQ  ) , among others.

Here's a product-by-product look at Apple's fiscal Q2 versus the median projections compiled by Fortune:

Product
Actual
Median Projected
Last Year
YOY Growth

iPhones sold

37.431 million

37.00 million

35.064 million

7%

iPads sold

19.477 million

18.00 million

11.798 million

65%

Macs sold

3.952 million

4.10 million

4.017 million

(2%)

Sources: Fortune, Apple SEC filings.

More importantly, Cook announced plans to increase its repurchase program from $10 billion to as much as $60 billion worth of Apple stock over the next two years. Existing shareholders will also enjoy a 15% dividend increase, to $3.05 a share, payable on May 13.

The Mac maker will also take on some debt, though management didn't provide details.

"We are very fortunate to be in a position to more than double the size of the capital return program we announced last year," said Tim Cook, Apple's CEO, in a press release. "We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases."

Suddenly, it's good to own Apple again. Will you hold to take advantage of the increased dividend? Open a new position? Add to an old one? Or simply sell Apple stock to capture profits from tomorrow's rally? Please weigh in using the comments box below.

And remember: if you're Interested in ongoing guidance, The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, provides regular updates via our Apple research research service.  To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (25) | Recommend This Article (30)

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  • Report this Comment On April 23, 2013, at 5:33 PM, XXF wrote:

    Now please tell us if you plan to shelve that stock or distribute it in management compensation. Share buybacks are a nice way to reward shareholders if those stocks stay off the market thus increasing ownership percentage of outstanding shares, but if each of those shares immediately turns tale and heads out the door in management's pockets AAPL investors are still in it to be fleeced.

    I hope that AAPL acts in the best interest of its shareholders as I have more than enough exposure through mutual and index funds, but based on the company's history I have a tough time believing that is what is going to happen.

  • Report this Comment On April 23, 2013, at 6:45 PM, Rsnakegt wrote:

    AAPL was cheap before the earnings announcement and is cheap after. Clearly, by any traditional metric...P/E (9 backward, 8 forward vs. 16+ for the broader market), EV/EBITDA (5.5), Price/Operating Cash Flow (under 8)....even dividend yield now (3% at today's close with the new dividend vs. under 2% for the broader market.

    So the answer to the "value" question is obvious. The obvious question weighing down the valuation is whether AAPL will go the way of RIMM (pardon me, BBRY, as if a ticker change changes things) and go from a once-dominant share of the smartphone market to an also-ran, which makes any assessment of valuation based on current operating parameters irrelevant.

    Time will tell.

  • Report this Comment On April 23, 2013, at 6:51 PM, Beringer1 wrote:

    You sure there's going to be a rally? Apple's earnings were 18% lower than a year ago.

    Next qtr if they hit the middle of the guidance, Top-line (revenue) will be LOWER y-o-y for the first time in forever... And at 36% gross margin (yet another decline) you will be looking at some godawful earnings next qtr.

    People love to look at the p/e, but somehow forget the E part is dropping like a rock and I have yet to see any analyst w/ the guts to tell us where he thinks the bottom is.

    How about 30B per qtr at 32% gross margin. That gives you a nice p/e of 15 at a stock price of about 320

    Good luck with that

  • Report this Comment On April 23, 2013, at 6:54 PM, TheFitz17 wrote:

    XXF - as per AAPL's cash redistribution announcement, the plan has four components:

    1) Reassessed annually

    2) 15% increase to dividend (bringing it to 3% of current price)

    3) increase of buyback provision to 60B v 10B until the end of 2015

    4) Additional buyback provisions to neutralize restricted stock awards

  • Report this Comment On April 23, 2013, at 7:01 PM, Beringer1 wrote:

    How do you get a forward p/e of 8? They're going to earn $7 a share next qtr.

    Don't look at the analyst predictions, that was before today. Do it yourself. Plug in 35B in revs, 36.5% gross margin, 26% tax rate (all given to you by apple today) and factor in r&d and sales expenses given this qtr. it's $7 a share. Historically Q3 (calendar) is about the same as Q2, and give the 2 quarters after that even a 50% bump. (being generous). Even with that, forward p/e is 11.

    Is that cheap? Maybe if the business is growing, but it's not. Revs, margins, and earnings have all been declining, while expenses are going up.

    Probably get a pop over the next few days or weeks as the fanboys will buy buy buy. But it won't be long before this stock goes sub 400 again and just stays there.

  • Report this Comment On April 23, 2013, at 7:20 PM, vasco42 wrote:

    The after-hours quote crashed during the earnings call and is now back around break-even. A rally tomorrow is in no way guaranteed.

  • Report this Comment On April 23, 2013, at 7:28 PM, dmvcal wrote:

    Their innovation/upgrade cycle has not kept pace with rapid, if generic, product intros from their imitators. They seem in the process of compacting their innovation/upgrade cycle. Because of their vastly more sophisticated offerings & commensurately complex supplier base they are no doubt scrambling to launch the next big thing that should lift operating margins & gross revenue.

  • Report this Comment On April 23, 2013, at 7:32 PM, Oril wrote:

    137 billion of untaxed cash in offshore accounts and Cookie commits to borrowing 100 billion to raise dividend and buy back shares while admitting nothing new will be coming out until at least this fall.

    No wonder the stock is heading south in afterhours. Can anyone say Oops?

  • Report this Comment On April 23, 2013, at 7:53 PM, RedScourge wrote:

    Oril, the reason for borrowing money is to avoid tax burden. They are borrowing in one jurisdiction using cash in another jurisdiction as collateral, because if they repatriate that cash, it gets taxed.

  • Report this Comment On April 23, 2013, at 8:08 PM, sajmal wrote:

    Amnesty for illegal aliens. No amnesty for legal profits??? Wake up government. Lost federal taxes will be offset by capital gains taxes from a rising stock price. We do not want companies migrating to tax havens or transferring r&d and patents overseas.

  • Report this Comment On April 23, 2013, at 8:16 PM, normcosta wrote:

    I still believe in this company and will take a day or two to get some direction. The added stocks will lower my average and get me back to even quicker.

  • Report this Comment On April 23, 2013, at 8:20 PM, Dreamer5794 wrote:

    Doesn't the fact that Apple has said that they have exciting products in the pipeline in new categories combined with them commuting to buy back 60 BILLION in stock because they feel that at today's prices Apple stock is the bed investment of their money tell you anything?

    Suggests to me that they have tremendous faith in their new products to me.

  • Report this Comment On April 23, 2013, at 8:31 PM, verces wrote:

    I would sell APPL and analyze taking position with BBRY or NOK. The potential for those two players in smartphone is huge rather than holding APPL. If you look at share price erosion that happened, there is no amount of dividend that compensates for APPL loss in valuation.

  • Report this Comment On April 23, 2013, at 9:26 PM, besheer wrote:

    What is APPL?

  • Report this Comment On April 23, 2013, at 9:26 PM, Beringer1 wrote:

    Dreamer5794 -

    Apple has to say "something", of course they're going to say they have "exciting products in the pipleline". What would you expect them to say, "yeah, we pretty much got nothing coming".

    You have to completely disregard that statement as an investor. They're ALWAYS going to try to be as positive as possible on the conference call.

    As for the buyback, means nothing to me. Take a look around the past 2 years. Some companies have re-purchased what was 40% of their market cap and their stock has gone nowhere. This is NOT an automatic BUY signal.

    Lastly, if they didn't announce the buyback, then all they had was terrible guidance - they had to do something today - or else they'd be down another 5-10% tomorrow.

  • Report this Comment On April 23, 2013, at 10:20 PM, Dreamer5794 wrote:

    It is possible that the terrible guidance or the next quarter is because of the fact that new products are coming and as rumours surface people will hold off buying current iphones or ipads in anticipation of the newer ones. Cook has complained about this in the past.

    If I was him I would drop a loose comment about new products in the fall and 2014 so that fewer people stop buying now. He refused to be pinned down about the 'fall' statement. When questioned he did not say that there would not be anything new earlier. My impression was that he implied that there would not be anything big in a new category until the fall but left the door open for some new things earlier.

  • Report this Comment On April 23, 2013, at 10:25 PM, Dreamer5794 wrote:

    Also, if you know that your stock is going down because of nothing substantial in the development pipeline then buying back stock in this quantity at what you know will be a 'high' price is irresponsible because eventually (by fall or early spring 2014) people will know that you had nothing and the stock will fall.

    The companies that have purchased 40% of their stock and went nowhere were stagnant companies.

    I don't believe that this is the case with Apple.

    They are spending more on R&D and have a history of innovating.

    Cook definitely used the word new categories when referring to the pipeline, not just new products. This implies more than a refresh.

  • Report this Comment On April 24, 2013, at 12:15 AM, Morijo wrote:

    Hi Beringer 1

    I was interested in your thoughts so went to see your postings about other stocks but your total appears to be on this page & on one article in January about Apple where you said "Apple is transitioning from a 30-40% growth company to what will be single digits as early as next quarter". Are you a motley fool or here to diss this one stock for some reason? Not that it matters I suppose but helps me put things in perspective.

  • Report this Comment On April 24, 2013, at 1:04 AM, FelixCaliferous wrote:

    Sell. Their best days are behind them if the best that they can do with their cash is to buy back their stock,

  • Report this Comment On April 24, 2013, at 1:28 AM, dknuth1 wrote:

    What else can they do with that much cash? No one else has a problem of too much cash and are then bashed for announcing a share buyback AND a program to repurchase shares commensurate to restricted stock options they may award. They have a large dividend that's growing, they'll reduce their float, and they still reported huge numbers, albeit they aren't growing at a meteoric pace anymore every quarter. Go short and I'll make money when you get squeezed.

  • Report this Comment On April 24, 2013, at 8:06 AM, Beringer1 wrote:

    Hi Morijo

    I'm not on this site very much. The only times I wind up commenting here is when I see an article like this where the author is clearly a "fan" of the stock he's writing about. (I.e. "suddenly it's good to own Apple again" as he asks us how we're going to play the INEVITABLE rally)

    over the past few years I've been big on MLPs (namely EPD KMP PAA ARLP NKA and NRP). Also big into mREITS, although I've halved my position after announcement of QE infinity.

    Throw in open and closed ended Muni funds, some preferred shares ( both funds like PGX PGF and individual companies) and high div players like MO T VZ SDRL. I round that out with several bond funds (DBLTX PTTDX LSIIX ADGYX PBDDX) Basically stuff that pays a ton, is tax advantaged, and has slow steady growth.

    MLPs have done extremely well, due to energy boom in US of late. They're a bit overpriced now though so I certainly wouldn't feel comfortable adding more here.

    Anyway that's the stuff I personally like, not saying its any better than anybody else's portfolio. I just don't see the point in guys loving a stock so much that they feel compelled to defend it or flat out cheer for it every chance they get. I feel the same way about gold bugs. I think they're nuts too.

    In fact the other rants you might see from me over the past couple years have been anti-gold

  • Report this Comment On April 24, 2013, at 8:53 AM, DCUDFlyer wrote:

    Beringer - quite a rant, but your comment "I just don't see the point in guys loving a stock so much that they feel compelled to defend it or flat out cheer for it every chance they get. I feel the same way about gold bugs. I think they're nuts too." is absolutely spot on.

  • Report this Comment On April 24, 2013, at 9:11 AM, XXF wrote:

    @ TheFitz

    Thanks for the reply. As I mentioned, lots of funds have exposure (in many cases overexposure) to AAPL so responsible distribution of that cash to shareholders is going to be a great thing for retail investors.

  • Report this Comment On April 24, 2013, at 11:21 PM, skleiniv wrote:

    I'm selling covered calls, collecting premiums to offset recent losses. If the stock is taken away, I simply sell puts at a lower price, collect the premiums until I come to own it again. It may seem overly simple, but I don't see anything that will cause this stock to pop between now and August. I usually collect a solid 5 dollars a share or so on the call side, but higher premiums on the put side if that time should come again after the shares have been taken by the call. I'm really surprised by how low this stock has gone considering how much product they sell and the massive cash it generates. Yes, it may be slowing, but that's expected of all companies once they saturate the market with product.

  • Report this Comment On April 24, 2013, at 11:22 PM, jessemobileguy wrote:

    Any product is still dependent upon a market. It is true that Apple has its own follwing, as does, HTC, Samsung, Windows, Nokia, just to name a few.

    As long as they are producing products that their market likes they will have a place, in the bigger picture, and of course a share of the $$$.

    What I have noticed at my kiosk is that Samsung, HTC and Windows is giving the over all market what they want, and need in the smart phone arena. Currently the money is in this industry is in tablets and mobile devices.

    However, I have my eye on Samsung they make good, sound and risky business decisions. Another, thing is Samsung always knows the over all market. I strongly favor Samsung as the industry leader. Just look at their smart t.v. integration and the fact that they make many more small devices, like cameras that intergragte into their electronic/wireless devices.

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