Micro challenges

Corporate results keep coming out for the 4Q24, and yesterday was the time for Apple. We can draw some conclusions from it: (1) even tech companies are having difficulties to grow. They meet or beat estimates slightly, but sales growth is becoming increasingly difficult. (2) China is clearly slowing down, and Chinese consumers are buying less Apple products (-11% YoY). What are cash rich companies doing? (3) Buying back their shares. Since 2020 Apple has repurchased 2 billion shares and consequently reduced its cash pile (including investments), as you can see below, from $285Bn in Dec ‘17 to $141Bn today (50%). And since a big part of that cash has gone to buybacks, (4) it hasn’t gone into Capex, (5) which will impair future growth, (6)which will affect future cash flows, (7) which should affect today’s price. At this valuations, 1% less growth may have a huge impact on stock prices.

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