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Apple: $110 Billion In Buybacks For A 13.98% Total Shareholder Return

May 02, 2018 11:46 AM ETApple Inc. (AAPL)74 Comments


  • Apple will be doing a lot of return of capital to shareholders.
  • It's most important revenue line item continues to grow strongly.
  • The stock looks worth buying if you believe there is strong customer captivity.

Apple's (NASDAQ:AAPL) earnings call turns me as bullish as I've been in a long time on the stock for 2 primary reasons: the enormous buyback program and services revenue. Having said that I'm simultaneously frightful of general stock market valuations and a recession somewhere between 6 and 24 months from now.

Here's what Cook said about services (emphasis added):

Q2 was our best quarter ever for services and momentum there continues to be incredibly strong. Revenue topped $9 billion for the first time, up more than $2 billion over last year's March quarter. We had all-time record revenue from the App Store, from Apple Music, from iCloud, from Apple Pay and more.

Services is the key to get the market to re-rate Apple as a company with a sustainable revenue base instead of vulnerable consumer cyclical. I've been arguing for years the services growth is extremely important:

The positives are becoming more impactful on the company. With revenue from services up 24% and revenue from iPhone sales -13% (-5% in number of units), Apple is becoming less of a one-product company (I know this will offend a lot of people, but it has been true for some time) and more of a software company. The latter is a much more attractive business and is generally awarded a higher multiple. The company also showed it can grow services revenue while the number of sold devices declines by 5%.

I believe services are so important because the device business is so vulnerable. The more people are pulled into all paid apps and cloud services the harder it becomes to switch to Android in a recession. The growth, momentum and size of the services business is very encouraging and an important to Apple its valuation:

Another thing I like to look at is

ChartAAPL EPS Estimates for Next Fiscal Year data by YCharts

This article was written by

Bram de Haas profile picture
Special-Situation And Event-Driven Ideas To Improve Risk Adjusted Returns
15 years of investing and I feel like a rookie in his first year at the academy. My roots are in the value school but over time I've learned to respect different approaches. I'm interested in what quants do, options traders do, and even what WallStreetBets is doing (keep your friends close and...)

I gravitate towards special-situations. That means situations around companies or the market where the price can move in a certain direction based on a specific event or ongoing event. This eclectic and creative style of investing seems to suit my personality and interests most closely.

Since 2020 I host a podcast/videocast where I discuss (special-situation/event-driven) market events and investment ideas with top analysts, portfolio managers, hedge fund managers, experts, and other investment professionals. I highly recommend it (pick episodes around topics that interest you) for the amazing guests that come on with regularity.

I've been writing for Seeking Alpha since 2013 after playing p0ker professionally. In 2018 I founded Starshot Capital B.V. A Dutch AIF manager. Follow me on Twitter @Bramdehaas or email me Dehaas.Bram at Gmail

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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