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Apple's Potential Mega Share Buyback Tomorrow has to come with Blowout Earnings

1 cover Apple buyback program


According to a new report this morning, a massive buyback may not be enough for Apple Inc. investors amid the worst month for big tech since the global financial crisis. The market’s reaction to Alphabet Inc.’s report shows it will also need blowout earnings.


"Seen as a safe haven within the FAANG cohort, Apple is expected to announce a share buyback program of as much as $90 billion when it unveils its quarterly results after the close on Thursday.


But that alone may not be enough to buoy the stock. Shares in Google’s parent company fell in premarket trading on Wednesday, even after the company announced a $70 billion buyback of Class A and Class C shares. Investors focused instead on a quarterly earnings per share miss, slower ad sales in Europe and a lackluster performance for YouTube," reports Bloomberg.


The report further noted that "For Apple, buybacks have become a central part of the investment case, and are especially important during turbulent times for technology stocks. Investors like repurchase programs as they reduce a company’s share count and thereby provide a lift to earnings."


(Click on image to Enlarge)

2 Bloomberg chart - Big Tech buybacks


According to Bob Shea, chief investment officer at Trim Tabs Asset Management, "Apple’s free cash flow and buybacks have definitely supported the company to a larger degree than its peers. Everything is coming under pressure right now, and investors are looking for names with high-quality and sustainable free-cash-flow profitability. Apple is at the top of that list."


According to Bernstein analyst Toni Sacconaghi, "with expectations for a huge buyback potentially already baked in, investors are likely to be most focused on the iPhone maker’s outlook. Apple faces several emerging headwinds, including lockdowns in China impacting its suppliers, the company’s withdrawal from Russia, dollar appreciation and a squeeze on consumers in Europe."


Sacconaghi added that "While Apple’s ongoing buyback has the potential to drive solid EPS growth, we believe that Apple’s multiple will be most shaped by its top line growth, which we think is likely to be low-to-mid single digits over time."


For more, read the full Bloomberg report.


10.0F - Apple News


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