How You Should React to Apple‘ $5.5bln Funding and Earnings?

1. $Apple(AAPL)$ Sells $5.5 Billion of Bonds to Fund Buybacks, Dividends

Apple Deserves a Surge after earning, What indicator shall we pay attention??

Photographer: Chris Ratcliffe/Bloomberg

Apple Inc.tapped the US high-grade bond market Monday with a $5.5 billion sale in four parts.

The longest portion of theoffering, a 40-year security, yields 118 basis points over US Treasuries, down from initial price discussions in the 150 basis points range. The order book for the sale peaked at more than $23 billion, a person with knowledge of the demand said,source from bloomberg.

As reported, Goldman Sachs, JPMorgan Chase and Bank of America are responsible for the bond offering.

The same time, many of the big banks have issued massive amounts of corporate debt following their results, making July's supply of corporate debt larger than expected. Analysts expect the momentum to continue into this week, with Wall Street expected to issue about $30 billion in new high-grade bonds.

2. Why did Apple raise Funds by issuing corporate bonds?

Some analysts say companies that issue debt financing appear to be taking advantage of the recent stability in the corporate market and relatively low funding costs.

In recent years, Apple has been reducing its massive cash hoard in recent hundreds of billions of dollars worth of share buybacks and dividends. Apple's cash and cash equivalents reserves total nearly $180 billion, and the company has paid dividends of about $14 billion a year over the past three years.

Recent earnings data show that Apple generated nearly $23 billion in operating cash flow, returned more than $28 billion to shareholders, and continued to invest in the company's long-term growth plans.

Bloomberg Intelligence analyst Robert Schiffman wrote on Monday:

Apple continues to raise tens of billions of dollars a year, more because of its confidence in expanding cash flow than operational needs.

Apple said:

it intends to use the net proceeds from the bond issuance for general corporate purposes, including buybacks and a planned dividend payment to return capital to shareholders, fund working capital, capital expenditures, acquisitions and debt repayment.

As for Apple's large-scale bond issuance, the market has long pointed out that it is mainly to avoid the taxes that need to be paid when the huge overseas cash is directly transferred back to the United States.

Apple stores a large amount of cash outside the United States. If the cash is directly transferred back to the United States, it will need to pay huge taxes. However, it raises funds by issuing bonds. Although it needs to pay interest to buyers when the bonds mature, the interest will not be paid. The scale is small compared to the size of the tax to directly transfer funds back to the United States.

Prior to that, on July 30, 2021, Apple issued $6.5 billion worth of bonds in the U.S. investment-grade bond market in four tranches to raise funds to return more cash to shareholders. This is the fourth time Apple has raised debt since May 2020. In addition, in 2015, Apple announced the details of a $6.5 billion bond issuing.

How does Apple's coporate debt rated?

In July 2021, Standard & Poor's gave Apple's bonds an "AA+" rating.

In December 2021, Moody's upgraded Apple's long-term credit rating to AAA, joining Microsoft and Johnson & Johnson as only a few U.S. companies in the S&P 500 with the highest credit ratings.

Apple latest Q2 2022 earnings report showed that Apple’s quarterly revenue reached $83 billion, with earnings per share, iPhone, iPad revenue and gross margin all beating expectations, helping to ease supply chain hurdles and a cooling economy impacting its sales worry.

  • Apple is expected to generate $665 billion in free cash flow over the next six years, on almost $3 trillion in sales, and spend $452 billion on growth.
  • Even after spending $90 billion on buybacks this year alone, Apple is expected to finish 2027 with $664 billion in cash. Apple isn't a company, it's a nation unto itself.
  • Over the long term, analysts expect about 11% long-term returns. Today Apple is 33% historically overvalued pricing in five years' worth of growth, with literally zero fundamentally justified upside over the next five years.

As of posting, Apple edged down 0.9% in premarket trading on Tuesday, with up 18.86% in the past July and YTD in 2022 is -9.04%. 

Question For You:

Apple is one of the most beloved companies on Wall Street, Are you a longterm investor of APPLE, 

What target Price you believe Apple will arrive?

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  • Qing93
    ·08-05
    我是,我觉得$苹果(AAPL)$ 会继续涨
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  • MARYGOH
    ·08-04
    Thanks for sharing 👍
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  • Very interesting article! Thanks for sharing the information and tips, much appreciated. [Happy] 👍
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  • max31415
    ·08-04
    Thanks for sharing!
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  • SR050321
    ·08-04
    $Apple(AAPL)$ good products 👍 support apple [Happy]
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  • Ph2046
    ·08-04
    Super good!!!!  go go go
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  • WingCheong
    ·08-04
    Great. Thanks for sharing.
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  • Vgreen
    ·08-04

    [Like] [Like] [USD] [USD] [USD] 

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    • Vgreen
      [Miser] [Miser] [Miser]
      08-04
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    • Vgreen
      [Cool] [Cool] [Cool]
      08-04
      Reply
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    • Vgreen
      [Sly] [Sly] [Miser] [Cool]
      08-04
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    View more 12 comments
  • vaztan
    ·08-04
    Apple is looking at the next new product for renewed growth. EV???
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  • Serene70
    ·08-04
    thks for sharing
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  • blitudik
    ·08-04

    Nice article

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  • sbikeken
    ·08-04
    從來都沒有看過那麼厲害的PO文!
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  • HHM13
    ·08-04
    Smart to pay low interest than to pay high tax!
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  • dallanube
    ·08-03
    best fruit
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  • Lostinroom
    ·08-03
    Good job Apple. Keep it up
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  • JJSIM
    ·08-03
    long term buy
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  • Eatmi
    ·08-03
    Good stock & good management
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  • WeeSin
    ·08-03
    Thanks for sharing
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  • wow, apple thinks it’s still cheap to borrow money even at today’s rates
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  • HHM13
    ·08-03
    Promising stocks!
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