Tag Archives: apple

Gamable EPS And Share Buybacks

EPS (Earnings per Share) is a corporate metric that is often pursued by the corporate managers and executives to increase their own payouts, and confused by investors for a signal of company health. As is well known (and we show this in our Risk & Resilience course), EPS is a “gamable” metric – in other words, it can be easily manipulated by companies, often at the expense of actual balance sheet quality. And I have written about this problem here on the blog for ages now. So, here is a fresh chart from the Deutsche Bank Research (via @bySamRo) detailing share buybacks’ (repurchases) contribution to EPS growth: In basic terms, there is no organic EPS growth (from net income) over the last 7 quarters, on average, and there is negative EPS growth from organic sources over the last 4 consecutive quarters. As noted in my lecture on the subject of “EPS gaming”, there are some market-structure reasons for this development (basically, rise of tech-based services in the economy): Click to enlarge Source of Data: McKinsey Click to enlarge Source: McKinsey However, as the chart above shows, share buybacks simply do not add any value to the total returns to shareholders (TRS), and that is before we consider a shift in current buybacks trends toward debt-funded repurchases. So, in a sense, current buybacks are rising leverage risks without increasing TRS. Which is brutally ugly for companies’ balance sheets, and given debt covenants, is also bad news for future capex funding capacity.

Apple Supplier NXP May Beat Tesla Partner Nvidia To Autonomous Car

Apple ( AAPL ) chip supplier NXP Semiconductors ( NXPI ) batted the iPhone slowdown Monday by unveiling a radar, lidar and vision-sending engine that could beat Tesla Motors ( TSLA ) partner Nvidia ( NVDA ) to the autonomous-car punch. The product platform was revealed during NXP’s annual user forum in Austin, Texas, and comes as Nvidia stock has hit record highs the past two trading days on Wall Street after reporting eye-popping Q1 earnings after the close Thursday. Nvidia touted its machine-learning sales for the Q1 beat. Machine-learning, analysts and companies say, will be essential to creating safe, fully autonomous vehicles. NXP’s BlueBox engine incorporates “embedded intelligence and machine-learning required for complete situation assessments,” the company says. On the stock market today , NXP stock rose 2.3%, following its BlueBox announcement, to 84.97, putting it up a fraction for the year. Shares had hit a 19-month low during the February dip that hurt most Apple suppliers. Apple’s iPhone shipment decline has chip investors worried about the next semiconductor frontier, as smartphone sales hit the brakes. But NXP CEO Rick Clemmer recently told IBD that 40% of his company’s revenue stem from automotive sales. For its Q1 ended April 3, 21% of NXP’s sales stemmed from its smartphone segment. The BlueBox engine uses NXP silicon and software at each advanced driver assistance system (ADAS) node and incorporates radar, lidar and vision-sensing to complete a 360-degree world model around the vehicle. “This functionality greatly improves car safety by both managing and preventing emergency situations,” NXP says. And “unlike closed systems focused only on vision and other single-sensor data streams, the NXP BlueBox engine for autonomous vehicle is an open-source platform.” Programmers can customize BlueBox to their specifications, NXP says. The product already is in hands of customers of four of the world’s top five carmakers, NXP says. It has been shipping since September but now is broadly available.

Microsoft Stock Rated Hold, Seen Near Full Value In Choppy Market

Investment bank Canaccord Genuity initiated coverage of Microsoft ( MSFT ) on Monday with a hold rating, saying the short-term risk-reward looks balanced for the software giant. Canaccord analyst Richard Davis set a price target of 55 on Microsoft stock. Shares rose 1.5%, to 51.83, on the stock market today . Microsoft stock hit a record high of 56.85 on Dec. 29. Microsoft has “attractive long-term prospects,” Davis said in a research report. “We believe Microsoft will continue to make a significant transformation into a much better firm. “We are quite optimistic that most of Microsoft’s growth initiatives will succeed, thereby propelling the stock ahead faster than the overall market.” In the best-case scenario, Microsoft’s renaissance could be similar to IBM ’s ( IBM ) in the 1990s or perhaps even Apple ’s ( AAPL ) in the 2000s, he said. Microsoft is moving from licensing desktop and server software to providing cloud computing services. Davis said he is optimistic about the direction Microsoft is headed, but said he’s cautious because of the choppy market of late. After dropping coverage of Microsoft more than a decade ago, Davis said he wrestled for the appropriate rating in resuming coverage. “We were ready to put a buy on MSFT,” Davis said. “Instead, we took pause after last month’s adequate quarter and slightly disappointing guide. Product and business model transitions are never as linear as analysts project and investors hope, so last quarter could be just a wiggle in fundamentals.” Microsoft stock could go sideways for the next one to three quarters, he said. RELATED: Microsoft Stock Plummets On March-Quarter Miss, Weak Guidance Windows 10 Adoption Slows As PC Users Resist Upgrade Push