Have Apple's Shares Really Hit An All-time High?

Apple ’s shares hit what appears to be an all-time high today at $100.40. On September 19, 2012 the shares closed at an all-time high of $702.10 or $100.30 when adjusted for its 7 for 1 stock split. This was one of three separate days that the shares closed above $700. On September 21, 2012, the stock hit an all-time intraday high of $705.07 or $100.72 when adjusted for the stock split.

Including dividends Apple’s stock had already hit an all-time high

A number of services such as Yahoo ! Finance and StockCharts.com that track stocks deduct dividends from a stock price to come up with an adjusted close. Since September 19, 2012, Apple has paid out $3.44 in dividends for each post-adjusted share, which would make its all-time high close $96.86. The shares closed at $97.19 on July 25, adjusted for a dividend payment, so in this aspect it has already passed its all-time close high.

Apple’s shares have also already surpassed its intra-day high of $97.28 when adjusted for the $3.44 in dividends that have been paid. The following graph from StockCharts.com shows how the shares have already broken the September 2012 highs.

However on a market cap basis the shares are still 9% below its all-time high

When Apple’s shares hit $702.10 there were about 948 million shares outstanding which made its market cap $665.7 billion. As of the June quarter there were 6.052 billion shares or 865 million when you adjust for the 7 for 1 stock split.

At $100.40 and 6.052 billion shares Apple’s market cap is $607.6 billion or 9% less than the $665.7 billion in September 2012. The shares will need to get to $110.01 to reach the equivalent market cap and probably higher after the September quarter results are announced since the share count should have decreased again.

Share buybacks are also masking lower operating profit growth

Apple’s share buyback program started to show up in the June 2013 quarter when its pre-split share count fell from 946 to 924 million. It has subsequently fallen to 865 million or 6.052 billion shares post-split. Overall Apple has bought back a net of 9% of its shares.

This led to EPS growth of 20% in the June 2014 quarter vs. operating income growth of 12%, which is still very strong for such a large company. In the March 2014 quarter EPS grew 15% while operating income grew 8%.

While it will probably be a couple of years for Apple’s share buyback programs to decrease (I’m assuming it doesn’t keep leveraging up its balance sheet and there is no tax law change to allow for a lower tax rate to bring back overseas cash) EPS growth will more closely match operating income growth when the company lessens the number of shares it buys back.

I do believe operating income can grow in the high single digits and potentially low double digits for the next year or so as larger screen iPhones should create a large upgrade cycle. I’m not expecting an iWatch or TV product to add a large amount of revenue since the company is approaching $200 billion in revenue. What could deliver good revenue with high margins would be a payment solution where Apple garners 20 to 30 basis points, or more, of a payment stream.

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