Apple’s Share Buybacks Expected to Continue Despite Uncertainty

Despite heightened economic uncertainty and signs of slowing revenue growth, expectations are high for Apple (AAPL) to extend its stock repurchasing plans, a bullish factor for its stock price.  Apple has historically reported its buyback plans for the year in its fiscal second-quarter results, which are expected on May 4.  Analysts expect Apple to announce $90 billion of stock buybacks this year, the same as last year. 

Investors like buybacks because they reduce outstanding shares, thus boosting earnings on a per-share basis and providing a lift to the stock.  Apple has spent $573 billion on stock repurchases since 2012, the most among U.S. companies.  Deepwater Asset Management said investors see the company’s buybacks as “a sign of their confidence in the business.”

Apple’s steady cash flow and strategy to return value to shareholders have helped it outperform its peers.  Apple shares are up +23% this year and are on pace to beat mega-cap peers Alphabet (GOOGL), Amazon.com (AMZN), and Microsoft (MSFT) for a second consecutive year.  In addition, Apple’s buybacks have been relatively steady despite stock market volatility or business cycles, which has prompted some investors to see Apple as a safe-haven stock in times of market turmoil.

In each of the last two years, Apple has allocated $90 billion for stock buybacks.  In 2018, it authorized $100 billion for stock repurchases, the most ever.  VerityData, a research company specializing in tracking insider activity and stock repurchase trends, said, “Apple hasn’t tried timing the market when it comes to buybacks, so we don’t think they’ll meaningfully slow buybacks as shares rally.”

Bloomberg Intelligence said even though Apple’s revenue and earnings per share are each projected to fall about -2% this year, that should “have no bearing” on the company’s buyback strategy.  Apple ended the last quarter with about $165 billion in cash and marketable securities and is still far away from its goal of having zero net cash, or cash minus debt, outstanding.  That cash goal led Bloomberg Intelligence to project that Apple’s share buybacks and dividends will reach $1 trillion by 2025 since the repurchase program started in 2012. 

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.