Apple has made huge progress toward its ‘net cash neutral’ goal

“In early 2018, just a couple months after tax reform was passed, Apple CFO Luca Maestri outlined a new goal that the company would be pursuing over time: getting Apple’s capital structure to ‘net cash neutral,’” Evan Niu writes for The Motley Fool. “That target entails reducing the company’s net cash, which includes its total cash as well as total debt, down to $0. Apple had finished 2017 with $162.7 billion in net cash when including commercial paper, a form of short-term debt that companies often use for working capital purposes.”

“In the quarters since, the Cupertino tech giant has slowly been chipping away at its net cash position, returning capital to shareholders through dividends and share buybacks,” Niu writes. “Apple just made a big dent in its net cash position… Apple’s net cash position [is] $112.8 billion, down from $130.3 billion at the end of the fourth quarter.”

U.S. “tax reform has given Apple significantly more flexibility in managing its global cash hoard, as it can now freely repatriate cash after paying deemed repatriation taxes of $38 billion,” Niu writes. “It’s quite likely that Apple will be able to get its net cash position below $100 billion within the next quarter or two.”

Read more in the full article here.

MacDailyNews Take: Why does Apple want to get to “net cash neutral” eventually?

As Gene Munster explained last summer:

Getting to net cash neutral is one of Apple’s biggest levers to move shares higher… 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… We anticipate Apple to maintain its net cash neutral approach into perpetuity. To do this, the company will need to return $50B+ each year, with 85% coming in the form of buybacks. This would still leave the company with about $6B in additional cash per quarter to invest.

Major Apple acquisition looms; ‘people will be shocked’ – April 4, 2019
Apple’s $130-billon problem: Zero-cash goal could be a cause for concern in a few years – March 8, 2019
Apple cash neutral: Smart capital allocation or corporate gimmick? – March 14, 2018
What ‘cash neutral’ means to Apple shareholders – February 22, 2018
UBS: How Apple could get to zero net cash – February 14, 2018

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