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Apple stock defies tech crash: iPhone manufacturer supports share price with share buybacks


Amazon, Meta or Tesla temporarily more than halved their stock market value in the 2022 tech crash. Apple is faring far better than the competition, despite poor business prospects. The trick: The iPhone group binds its shareholders through share buybacks to an unprecedented extent.

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Apple boss Tim Cook: Problems in China, little news - but $ 454 billion for share buybacks and dividends



The US carmaker Tesla and the Facebook subsidiary Meta have each lost around two-thirds of their market value since the beginning of the year.

The online department store Amazon has almost halved its market capitalization to currently $886 billion, as has the streaming service Netflix.

The Google mother Alphabet complains of a loss in value of almost 40 percent since the beginning of the year.

The crash in technology stocks, triggered by rising interest rates in the USA and a dwindling appetite for risk on the stock market, has many prominent victims.

The stock market high-flyers of the past few years have fallen deeply in 2022.

And Apple?

The world's most valuable company, still valued at more than $2 trillion, has only suffered a few scratches as the tech horror year of 2022 draws to a close.

Around 22 percent loss of value since January 2022 - that's a lot of money in absolute numbers, but Apple hasn't had it as badly as its competitors.

The prospects for Apple are not rosy either: the series of protests and production stops at the supplier Foxconn in China have slowed down production significantly.

This should also make itself felt in the Christmas business, Apple's most important quarter of the year.

Inflation and the threat of recession are also dampening customers' desire to buy more high-priced Apple products.

Especially since it is becoming increasingly difficult to surprise customers with technical innovations.

And in the EU, the pressure on the company to open its cash machine app store to other providers is growing.

Even Apple's business is not immune to the global crisis.

So why is Apple stock doing so much better than the competition?

454 billion for share buybacks and dividends

Despite the crisis, the Cupertino-based group is still highly profitable, like many other competitors.

But unlike its competitors, Apple uses its billions of dollars in free cash flow almost exclusively to shower its own shareholders with it.

Instead of increasing sales through company purchases and takeovers, Apple gives gifts to its shareholders.

In a big way.

According to calculations by the business and finance agency Bloomberg, Apple has returned around $454 billion to its shareholders in the form of share buybacks and dividends over the past five years.

Investors benefit from buying back their own shares, since a company's profits are then spread across fewer shares, which means that earnings per share increase.

It is a course maintenance program of a previously unknown dimension.

Buy Disney and Netflix?

Then rather give the money to the shareholders

$454 billion could have bought oil giant ExxonMobil.

Or the US investment bank JPMorgan Chase.

Streaming competitors like Disney and Netflix could have treated Apple to a double pack - and still had plenty of change left over.

"Apple hasn't listened to the investment bankers' advice," Kimberly Forrest, founder of Bokeh Capital, told Bloomberg.

"Apple showed discipline and returned this huge sum to its shareholders. And they have been rewarded for doing so."

The Apple platform is considered to be particularly "sticky": Anyone who has bought an iPhone and an iPad will find it difficult to say goodbye to the colorful and convenient world of Apple services.

With its services, Apple is building a wall around its customers, a circumstance that Apple's major shareholder Warren Buffett particularly appreciates.

Just like its customers, Apple also walls its investors in and buys loyalty: not with services, but with money.

No other company in the world has spent as much money on buybacks and dividends in the past 5 years as Apple, the most expensive company in the world.

However, some fund managers such as Michael Lippert remain skeptical.

The days of big innovations and rapid growth are over, even at Apple, Lippert tells Bloomberg.

Colleagues like Sameer Bhasin from Value Point Capital, on the other hand, point to the loyalty and devotion of customers, who help Apple even during difficult times: "Hardly any other company has such loyal and solvent regular customers as Apple," emphasizes Bhasin.

And hardly any other company does so much to ensure that the shareholders remain loyal.


Source: spiegel

All news articles on 2022-12-22

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