Did Jobs Know... The Effect of Apple's Share Buyback

Massive Cash-Based Dividends and Share Buybacks Expand, Entering Safe Asset Status
CEO Tim Cook's Management Skills Reappraised
AR and Electric Vehicles as the 'Next Big Thing'

Many customers always gather at the entrance of the Apple Store on 5th Avenue in Manhattan, New York City.
[Photo by Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Apple is no longer just a growth stock. It is a safe asset backed by stable cash flow from iPhone, iPad, and Apple Watch sales, combined with massive share buybacks.

On the 3rd, when Apple's market capitalization surpassed $3 trillion (local time), US financial news channel CNBC cited the effect of share buybacks as the reason. Investors are evaluating Apple as a safe asset due to its large-scale capital return policy.

In the past, during the era of founder Steve Jobs, Apple did not repurchase its shares. However, Tim Cook, Jobs' successor and CEO, began share buybacks in 2012. Over the past decade, Apple has repurchased and retired $467 billion worth of shares. Citigroup expects Apple to announce an additional $90 billion in share buybacks this year and to increase dividends by 10%.

Global credit rating agencies have also rated Apple as the top safe asset. Moody's assigns Apple an investment grade of 'AAA,' which is the same as the US credit rating and two levels higher than South Korea's. This indicates that Apple is considered unlikely to go bankrupt.

With the market cap surpassing $3 trillion, Tim Cook's management skills are being newly spotlighted. Despite the COVID-19 pandemic, he is praised as a supply chain expert who turned crisis into opportunity through stable management. Since Tim Cook became CEO, Apple's market cap has increased by $2.7 trillion.

Apple CEO Tim Cook
Photo by Reuters Yonhap News

The market is predicting further gains for Apple. According to Bloomberg, out of 45 analysts covering Apple, 35 have a 'buy' rating, while only 2 have a 'sell' rating. The Wall Street Journal (WSJ) reported, "Investors are excited about rumors of developing the 'next big thing' such as augmented reality (AR) and electric vehicles." Apple is also investing significantly in research and development (R&D), including its own chips.

On the other hand, doubts about Apple's growth potential remain. In the fiscal year ending September last year, Apple achieved 33% revenue growth compared to the previous year. However, according to Visible Alpha estimates, iPhone sales, which surged 24% last year, are expected to grow only 1% this year. FactSet forecasts Apple's revenue growth rate over the next three years at 5%. WSJ pointed out, "This is the lowest among the five major big tech companies."

The regulatory pressure from the US government is also a risk factor. Apple's 30% App Store commission policy and the ban on in-app payments are the main targets of the US government's intensified regulation of 'big tech' companies.

This content was produced with the assistance of AI translation services.