Is David Einhorn Right About Apple Inc. (AAPL)?

Another possibility that has been discussed before is the idea of raising debt to boost domestic cash specifically to pay dividends or repurchase shares. While this may seem counterintuitive at first, there is an implicit cost of equity that shareholders demand and if the cost of debt is lower than the cost of equity (quite possible given the current low interest rate environment), then the move would be beneficial in that it could reduce Apple’s overall weighted average cost of capital, or WACC.

Apple can afford it
White thinks that Apple could easily afford to boost both its current dividend and buyback authorization. The analyst figures $5 per share quarterly is within reason, nearly twice the current quarterly payout of $2.65 per share. He also thinks that Apple could boost its share repurchase program to an incredible $100 billion over five years.

Either way, it’s pretty clear that Apple has to do something about its cash, and when it does, that will probably bring in the value investors.

There’s a debate raging as to whether Apple remains a buy. The Motley Fool’s senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

The article Is David Einhorn Right About Apple? originally appeared on Fool.com and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft.

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