A large cash stash signals a failure to identify worthwhile business opportunities. For other companies it'd be an ominous sign. For this one? Maybe it's like the OP's observation that a PE of 18 is now considered low.
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For Apple specifically, I consider it a particularly ominous sign.
When you look at Apple's history of identifying worthwhile business opportunities, it was all driven by one man - Steve Jobs. He is dead. And anyone else with his abilities is more likely to create a startup than to join Apple, spend decades rising the corporate ladder, and then reveal an unexpected talent for creating entirely new lines of business that undermine existing ones.
The amount of cash they have now isn’t comparable to what they had when Steve was alive. They have huge takeover money now. I think they’re saving it for a rainy day ie the next crash. Current valuations are historically very high, and it would be imprudent to start buying up companies now. They’ll get much more value if they wait, which they have been doing quite patiently.
True. Or that visionary will choose the other alternative - Join Google/Alphabet or Amazon with it's internal startups
Apple has been sitting on large amounts of cash for several years and has yet to take a decision on how to use that cash.
If they're not buying anything they should repurchase stock or pay dividends, but either way, you can totally see they don't have a clear M&A strategy.
I mean, Beats? Shazam?... Apple has the financial power to buy a large supplier and reduce costs by vertically integrating their supply chain but they rather choose to pursue opportunities that have little to no impact on their added revenues.
They have been both repurchasing stock and paying dividends for several years...
Never at the scale of their cash reserves and cash growth. In 2014, Apple had 100 billion in cash and now 4 years later they have 250 billion in cash. During the past 10 years, Apple's average free cash flow per share growth rate was 31.40% per year.
They keep hoarding cash. None of that cash has been deployed or reinvested in a meaningful way. Their stock repurchase plan and dividend payments have been pretty miserable for a company with that amount of disposable cash.
From the top 10 biggest annual dividends payers in S&P 500, Apple is the most stingy. Their yield is 1.72%. Compared to other companies with yields of up to 5% (like AT&T), that's actually a shitty dividend payout.
That's because they have it all locked away in tax shelters.
Tim Cook announced Jan 17 that he intends to bring most of the money back, and pay close to $40 billion in penalties. Presumably a lot of that will get returned to investors or reinvested in some way.
> and pay close to $40 billion in penalties
That's a funny way to pronounce lowered taxes.
If he simply continued to do what he is already doing, he would pay $0 in taxes..indefinitely. Viewed that way this is clearly a penalty for changing course.