Apple Hits $3 Trillion Market Cap After Spending More than Half a Trillion Dollars on Stock Buybacks Since 2013

[Gunnar Larson]

https://wallstreetonparade.com/2023/07/apple-hits-3-trillion-market-cap-after-spending-more-than-half-a-trillion-dollars-on-stock-buybacks-since-2013/



Apple Hits $3 Trillion Market Cap After Spending More than Half a Trillion
Dollars on Stock Buybacks Since 2013
Frightened Wall Street TraderBy Pam Martens and Russ Martens: July 3, 2023 ~

According to S&P Dow Jones Indices, component companies of the Standard &
Poor’s 500 spent $922.7 billion in 2022 buying back their own stock. That
was $41 billion more than the S&P 500 companies spent in 2021, which came
in at a lofty $881.7 billion.

One of the companies leading the stock buyback parade is Apple. Of the
$922.7 billion spent on stock buybacks in 2022 by all companies in the S&P
500, Apple represented 10 percent of that spending with $90.2 billion in
buybacks of its own stock.

On Friday, June 30, 2023, Apple, the iPhone manufacturer, closed the
trading day in New York with a market value (market capitalization) of just
over $3 trillion, an historic record. Apple’s $3 trillion market value is
eight times that of the second largest mobile phone manufacturer, Samsung.

We decided to dig into the 10-K forms that Apple is required to file with
the Securities and Exchange Commission to see just how much help the
company has had with propping up its share price by buying back its own
stock. What we found stunned even us. Over the past decade, and including
the first quarter of this year, Apple has juiced its share price by buying
back a total of $573.4 billion of its own stock. The breakdown is as
follows, per fiscal year:

Apple’s Stock Buybacks

2023: First Quarter: $19.2 billion

2022: $90.2 billion

2021: $85.5 billion

2020: $72.5 billion

2019: $67.1 billion

2018: $73 billion

2017: $33 billion

2016: $30 billion

2015: $35 billion

2014: $45 billion

2013: $22.9 billion

The second most valuable company in the world is Microsoft, which closed on
Friday with a market cap of $2.53 trillion. According to its 10-K filings
with the SEC, it has bought back $150.9 billion of its stock over the same
span of time, that is, fiscal years 2013 through 2022 and the first quarter
of 2023. To put that into perspective, Apple has bought back $422.5 billion
more of its own stock than Microsoft. This raises the question, where would
Apple’s stock price actually be without all of those stock repurchases?

Microsoft’s Stock Buybacks

2023: First Quarter: $5.5 billion

2022: $28 billion

2021: $23 billion

2020: $19.7 billion

2019: $16.8 billion

2018: $8.6 billion

2017: $10.3 billion

2016: $14.8 billion

2015: $13.2 billion

2014: $6.4 billion

2013: $4.6 billion

On June 14 we reported that “Headlines are sprouting up at various news
outlets, touting that the S&P 500 is in a new bull market. But, in fact,
almost all of the gains in the S&P 500 Index year-to-date have come from
just seven stocks: Apple (ticker AAPL), Alphabet (GOOG), Amazon (AMZN),
Meta Platforms (formerly Facebook, ticker META), Nvidia (NVDA), Microsoft
(MSFT), and Tesla (TSLA).”

Alphabet and Meta Platforms are also spending big buying back their own
stocks. In fact, if you add the share buybacks in 2022 of Alphabet ($59.3
billion), Meta Platforms ($27.93 billion) to the amounts spent buying back
their own stock by Apple ($90.2 billion) and Microsoft ($28 billion) in
2022, these four companies represented 22 percent of the dollar amount of
all stock buybacks in the S&P 500 last year. (As noted above, total stock
buybacks of S&P 500 companies in 2022 tallied up to $922.7 billion.)

In her 2016 book, “Makers and Takers: The Rise of Finance and the Fall of
American Business,” Rana Foroohar called out Apple’s use of borrowed money
to finance buybacks. She wrote:

“…Apple’s behavior is no aberration. Stock buybacks and dividend payments
of the kind being made by Apple – moves that enrich mainly a firm’s top
management and its largest shareholders but often stifle its capacity for
innovation, depress job creation, and erode its competitive position over
the longer haul – have become commonplace. The S&P 500 companies as a whole
have spent more than $6 trillion on such payments between 2005 and 2014,
bolstering share prices and the markets even as they were cutting jobs and
investment.”

In a column in the Washington Post in June 2018 (paywall), Steven
Pearlstein warned that “The most significant and troubling aspect of this
buyback boom, however, is that despite record corporate profits and cash
flow, at least a third of the shares are being repurchased with borrowed
money, bringing the corporate debt to an all-time high, not only in an
absolute sense but also in relation to profits, assets and the overall size
of the economy….”

Pearlstein said that the upshot of all of this debt-financed stock
repurchasing is that “Corporate America, in effect, has transformed itself
into one giant leveraged buyout.”
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