Munster: Apple is Flush With Cash, But Don't Expect Big M&A

Apple Inc. (NASDAQ: AAPL)'s decision to repatriate more than $200 billion in cash has many investors speculating a major M&A deal is imminent. But according to a top Apple watcher, that won't be the case. 

The Analyst

Gene Munster, a former research analyst and co-founder of Loup Ventures.

The Thesis

Apple confirmed it will pay $38 billion in repatriation tax, which implies it will bring $215 billion back to the U.S., Munster said in a blog post. If it wasn't for the tax legislation signed by President Donald Trump, the iPhone-maker would have been left with an $80-billion tax bill for its cash — assuming it repatriated the capital in the first place.

Yet despite being flush, Apple is unlikely to pursue any M&A deal larger than $5 billion, Munster said. The cash infusion is also unlikely to change Apple's capital allocation strategy, and the primary use of the cash will be stock buyback, Munster said.

Apple will likely boost its share buyback program by around $70 billion over the next three years; announce a special one-time cash dividend of $12 billion; and boost its dividend by 15 percent per year, according to Loup Ventures.

Apple's motivation is likely 80 percent due to economic reasons and 20 percent for political reasons, Munster said, adding that all of the plans are "good for the company" in the longer term, but "already priced into Apple's stock" at current levels.

Price Action

Shares of Apple were trading up 0.25 percent after the open Thursday.

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Photo courtesy of Apple.