Apple shares surged 7% on Friday, buoyed by the company’s announcement of a record stock buyback plan and optimistic sales forecasts, reigniting investor interest amidst previous concerns over weak demand and heightened competition in China.
Late Thursday, Apple revealed its projection for fiscal third-quarter sales, surpassing Wall Street’s modest estimates.
Additionally, it greenlit an additional $110 billion in share repurchases, marking the largest buyback authorization by a U.S. company, as noted by EPFR analyst Winston Chua.
This surge in stock price contributed nearly $200 billion to Apple’s market capitalization, elevating it to $2.86 billion, second only to Microsoft, valued at $3 trillion.
If fully executed at Friday’s stock price, Apple’s buyback plan would entail repurchasing nearly 4% of its shares.
The company’s optimistic forecast reflects confidence in upcoming product updates, with an iPad event scheduled for May 7, aimed at revitalizing demand in its hardware segment following a period of sluggish growth.
Analyst Josh Gilbert from eToro remarked, “Many investors had begun to question if Apple still has what it takes to deliver the top growth they have become accustomed to over the years, but CEO Tim Cook turned on the charm and offered relief to investors.”
The buyback initiative aligns Apple with other U.S. tech giants, which have been rewarding investors with substantial cash returns to assuage concerns about escalating investments in generative AI, signaling industry maturation.
Danni Hewson, head of financial analysis at AJ Bell, highlighted the significance of sustaining growth for growth stocks, emphasizing the role of buybacks or dividends in maintaining investor confidence, particularly when growth rates decelerate.
Contrary to Alphabet and Microsoft, Apple’s cautious approach to AI investment hasn’t led to cost surges, but its gradual AI service rollout has been met with investor scrutiny, contributing to a 10% decline in its share price this year.
CEO Tim Cook hinted at forthcoming developments, sparking speculation among analysts regarding AI integrations at Apple’s upcoming developer conference.
Bernstein analysts anticipate a robust iPhone 16 cycle fueled by AI functionalities and prolonged replacement cycles.
Thirteen analysts revised their target price on Apple, with the median view reaching $200, 15% higher than the stock’s last closing price.
Apple’s stock trades at 25 times its 12-month forward earnings estimates, compared to Microsoft’s 30.5, reflecting Microsoft’s recent ascent as the world’s most valuable firm owing to its AI initiatives.