Gene Munster: Apple will be 'cash neutral' within 3 years

Philip Elmer-DeWitt

That’s two years earlier than investors have been led to expect.


From a note to Loup Ventures subscribers posted Monday:

We expect Apple will add $100B to the buyback and increase the dividend by 16%. This is in line with last year’s changes to the program.

  • Tim Cook said on the Mar-18 earnings call that Apple will be net cash neutral “over time,” but stopped short of specifying a timeline. Since then, details have been limited. We believe the timing of reaching net cash neutral will be a central topic on the earnings call.
  • Getting to net cash neutral is one of Apple’s biggest levers to move shares higher. We expect Apple to be net cash neutral in 3 years, ahead of investor expectations of 5 plus years.
  • To become net cash neutral, Apple will have to reduce its cash balance by almost $150B. We expect Apple to return $300B to investors in 3 years (cash from operations + cash draw down from balance sheet), with ~85% through buybacks.
  • The mechanics are simple. Buybacks lower share count and raise EPS, which should theoretically move shares of AAPL higher by 24% over the next 3 years.

My take: That’s what I call news Apple investors can use.