Apple CEO Tim Cook can’t catch a break.
One day after investors yawned following Cook’s announcement that the company would return a mammouth $100 billion to shareholders over three years, the executives learned that the company’s first debt offering would not get the industry’s top AAA rating.
Despite having $145 billion in its coffers, Apple will see its debt rated AA+ by Standard & Poor’s — and an equivalent Aa1 by Moody’s.
“What was S&P smoking when they did that?” said Vitaliy Katsenelson, chief investment officer of Investment Management Associates, which owns Apple stock.
“You have a company that has more than $100 billion in cash that they can spend any minute,” Katsenelson said. “Their balance sheet, recurrence of revenues, cash flows and brand should give them a Triple-A rating.”
There are only four companies with AAA ratings: ExxonMobil, Johnson & Johnson, Automatic Data Processing — and Microsoft.
That has to irk Cook.
The ratings agencies, which recently downgraded the US to AA+, said giving Apple a lower credit rating than Microsoft is perfectly okay.
“Apple’s Aa1 rating is not higher due to Moody’s view that there are inherent long-run risks for any company with high exposure to shifting consumer preferences in the rapidly evolving technology and wireless communications sectors,” said Moody’s analyst Gerald Granovsky.
It is the first time Apple is offering debt — which will be used to help fund its increased dividend and stock buyback program.
Apple, which passed Microsoft in market cap and prestige years ago, nonetheless has seen the software giant’s shares outperform its own during the past year.
Over the last 12 months, Microsoft shares are down 2 percent and Apple’s are down 29 percent.
Apple shares closed yesterday at $405.46, down just 67 cents. They’re down a whopping 23 percent this year, well below their all-time high of $702.10 in September 2012.
Experts said that the less-than-perfect rating is not likely to have an impact on Apple’s debt issuance. Interest rates are so low that even companies with Single-A ratings are able to borrow at record low costs.