Apple Reportedly Issuing Bonds, Even With $36 Billion Cash on Hand

Apple, taking advantage of low rates, is preparing to issue bonds, including 40-year  paper at just 1.15 to 1.2 percentage points above Treasurys, a media report says.
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Apple  (AAPL) - Get Report is issuing bonds, even as it has $36 billion of cash on hand, a media report says.

The Cupertino, Calif., tech titan wants to take advantage of low interest rates. A person with knowledge of the matter told Bloomberg that the longest issue in the offering, with a 40-year maturity, may yield just 115 to 120 basis points above Treasurys. 

The 30-year Treasury recently yielded 1.85%

Apple will apply the money to general purposes, including share buybacks and dividends, the person said. It also may use the proceeds for working capital, capital spending and repayment of debt.

The company’s shares recently traded at $133.36, up 1.1%. They have soared 71% over the past year, as consumers continue to flock to Apple products during the pandemic.

Morningstar analyst Abhinav Davuluri puts fair value for Apple at $98. “Although we anticipate strong double-digit iPhone growth in 2021, we think growth rates will moderate in the coming years,” he wrote after Apple’s latest earnings report last week.

“We are raising our fair value estimate for narrow-moat Apple to $98 per share from $85, as we incorporate a stronger near-term outlook due to the current 5G iPhone cycle and ongoing work- and learning-from-home dynamics bolstering Mac and iPad segments. 

"Nonetheless, we think [the] shares are currently overvalued, as we think recent growth trends could be unsustainable past 2021.”

Further, “[management] anticipates year-over-year growth for the March quarter, though the services business faces a difficult year-over-year comparison,” Davuluri said.

“Meanwhile, we expect the Mac and iPad segments to begin decelerating in a few quarters, following a stretch of robust growth due to covid-19-related working- and learning-from-home.”