Apple's shares could move 7 percent if it puts its massive cash hoard to work: Analyst
- If Apple uses its massive cash hoard, the company could end up giving back $60 billion per year to investors, says Gene Munster, founder at Loup Ventures.
- "This is a cash-generating machine that is head and tails above any other FANG stock and really any other company in the world," he says.
- In light of Apple's $100 billion buyback announcement, Munster says investors will be less concerned with iPhone sales compared with stock buybacks over the next few quarters.
If Apple puts its massive cash holdings to work, the company could end up giving back $60 billion per year to investors, said Gene Munster, founder and managing partner at Loup Ventures, a venture capital firm.
"That alone will move the stock 7 percent higher in the next year," Munster told CNBC on "Fast Money" Tuesday night.
"This is a cash-generating machine that is head and tails above any other FANG stock and really any other company in the world," he added.
Earlier this year, following disappointment over its iPhone sales, Apple announced its plans to go net cash neutral, or an equal amount of cash and debt bringing the balance to zero. It will target to put nearly all its $163 billion in net cash to work, hinting at more stock buybacks, dividends or acquisitions. The company currently has a cash reserve of $267.2 billion.
Meanwhile, Apple announced earnings Tuesday after the bell, beating Wall Street's expectations, but sold fewer iPhones than expected. Still, the sale of 52.2 million iPhones was up — with only 51 million sets sold the same time last year. Shares immediately rose by as much as 5 percent in after-hours trading following the earnings release.
But what really helped tame investors' fears was the company's announcement of a massive $100 billion stock buyback.
"There's going to be a shift over the next few quarters and couple years where investors are less interested on what the iPhone numbers [are] in any given quarter," said Munster, who spent more than two decades as an analyst at Piper Jaffray. "They'll be more interested in about what they buy back."
While Apple CEO Tim Cook did not specify a timetable for the buyback during the conference call, Munster predicted it will be faster than expected.
"The last time [Apple] gave a time frame they exceeded that by 25 percent," he said. "If you take the approach that Apple is a very systematic company and they're going to follow the patterns that they've done in the past, you can get to those conclusions."
Munster rated the quarter as an "A-," and said it wasn't a "blow-out quarter," but there's still room for positive growth.
Over the next six months, Munster predicted the buzz around Apple will be in anticipation of new phones, including three models coming out this fall, with one rumored to be 25 percent larger than current models. Meanwhile, Apple executives have said the iPhone X is the most popular phone in China.
"You can sort of read into that, that they think there is more room for higher priced phones," he concluded.