In December, a tax bill was passed in the United States that allows Applu and other companies a tax write-off to repatriate (return) foreign money back to the US under much better tax conditions. There was speculation about how the Cupertino company might use the foreign cash, such as buying Netflix or Tesla. However, analysts say the Cupertino company will use the money much smarter, namely to buy back shares.
Citi analysts Jim Suva and Asiya Merchant based their claims on the words of the CFO Applu, who is Luca Maestri. “If you look historically at what we've done over the last few years, you'd see that we've effectively returned roughly 100% of our free cash flow to our investors. And that's the approach we have now." Maestri let himself be heard. That his words make your head spin? We will try to explain them to you a little.
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According to analysts, half of the repatriated cash will be used for a more massive share buyback, which should take place in the next two years. It would mean that the number of shares would be reduced (by Apple bought back), and thus would Apple became more valuable because suddenly fewer of its shares would be traded, which would logically increase their value considerably (at least in the short term).
Analysts from RBC also agree with the forecast. Apple has reduced shares by roughly 22% to date, but will continue to buy back shares even faster and more massively than before.
Source: 9TO5Mac
