Here's Why Apple Shares May Soon Soar

NEW YORK ( TheStreet) --There's a lot of talk about Apple ( AAPL) starting with news that Chief Financial Officer Peter Oppenheimer will retire after 10 years with the company.

Oppenheimer's successor will be Luca Maestri, who joined Apple about a year ago as vice president of finance and corporate controller after a two-year stint as the CFO of Xerox ( XRX). Maestri's reputation as someone who knows the international markets offers an important insight into his selection as CFO.

One question surrounding the new CFO appointment is whether there will be a new approach in what Apple does with its enormous cache of cash. The company's cash position, as stated in its first quarter 2014 financial report, had grown by $12 billion to nearly $159 billion. No wonder Carl Icahn stated earlier this year that Apple is "...perhaps the most overcapitalized company in corporate history."

According to Bloomberg, Apple may announce by year's end a plan to use its abundant free cash flow and total cash to satisfy the demands of investors who want Apple to stop acting like a bank and start becoming more of a growth machine. Shares are down over 5% for the year to date as of the Wednesday close of $532.

With a large percentage of its cash parked off-shore, according to the Wall Street Journal, the company has started hiring critical employees in areas of the world where the prospects for lucrative growth are greatest.

The company has boosted hiring in countries like China and Taiwan, head-hunting for more engineers and supply-chain managers who can speed the development of components needed for new versions of its iPhone and iPad. Faster development and production leads to more timely and frequent releases of its best-selling, high-end products. This could lead to quarterly earnings surprises and more optimistic future guidance.

Now that Apple's North American division accounts for only about 37% of revenue, and 40% of its retail stores are international, it makes perfect sense for the company to use some of its offshore wealth on expanding globally, especially in the massive Chinese market.

Apple is already gearing up for its latest iPhone, the iPhone 6, which, according to one analyst, may be ready sooner than many anticipated. According to Christopher Ciaccia of TheStreet, Jefferies analyst Peter Misek believes the next version of the iPhone is due for a late summer release.

That will push up shares. So will returning more cash to shareholders, either as an increase in the dividend or accelerating the company's stock buyback program. Both of these steps would attract reluctant investors to Apple as both a growth and a value play.

No wonder analysts like Canaccord Genuity's Michael Walkley increased his EPS estimate for fiscal 2014 from $42.86 to $42.92 and also raised his fiscal 2015 projection robustly from $47.56 to $49.96 based on higher iPhone unit estimates. He also increased his price target from $570 to $600.

Taking the average price target of the two analysts mentioned, a $612 one-year price target is 15% above Wednesday's closing price of $532. Add on the current dividend of $12.20 (2.3% yield) and the total return potential increases to more than 17%.

Include an increase in the dividend and/or a bigger, faster stock buyback program and even Carl Icahn will be singing Apple's praises. The possibilities are realistic when a company has $159 billion stashed away for all kinds of encouraging opportunities.

At the time of publication the author had positions in AAPL.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.


Marc Courtenay is the founder and owner of Advanced Investor Technologies, LLC, as well as the publisher and editor of

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