By Aditya Soni
(Reuters) – Apple shares jumped 7% on Friday as the iPhone maker’s record share buyback plan and promise of sales growth brought back investors who had shunned the stock due to concerns over weak demand and increased competition in China.
The company late Thursday forecast third-quarter sales that beat Wall Street’s modest expectations.
It also approved additional share repurchases amounting to $110 billion, the largest repurchase authorization ever granted by a U.S. company, according to EPFR analyst Winston Chua.
Friday’s stock gain added nearly $200 billion to Apple’s market capitalization, bringing it to $2.86 billion, just behind Microsoft, with a valuation of $3 trillion.
At Friday’s stock price, executing Apple’s full buyback authorization would mean buying back nearly 4% of the company’s stock.
Apple’s forecast shows it is confident that product updates, starting with an iPad event on May 7, will boost demand in its hardware business after months of slow growth that left some investors doubtful of its status as an essential title.
“Many investors were beginning to question whether Apple still had what it took to generate the high growth they’ve become accustomed to over the years, but CEO Tim Cook dropped the charm and offered relief to investors,” said Josh Gilbert, an analyst at Investment. eToro platform.
The buyout brought Apple in line with other U.S. tech giants that have flooded investors with cash in recent earnings seasons to ease concerns about increasing investment in generative AI. Some analysts also see it as a sign of maturity in the sector.
“Growth stocks need to demonstrate that they continue to grow at a rate that satisfies their shareholders. Once that growth slows, and Apple is a prime example, then buybacks or dividends can persuade investors to maintain confidence.” , said Danni Hewson, head of financial analysis. at AJ Bell.
Unlike Alphabet and Microsoft, Apple has not experienced increased costs because it has not made large investments in AI. But the slow rollout of AI services has been hurt by investors, partly fueling the 10% drop in its stock price this year.
CEO Cook said Apple plans to share “some very exciting things,” stoking expectations from several analysts that Apple will announce AI integrations at its upcoming annual developers conference, which is expected to be its largest ever .
Bernstein analysts said they expected “a strong iPhone 16 cycle powered by AI functionality as well as elongated replacement cycles.”
At least 13 analysts have raised their price target on Apple, bringing the median view to $200, or 15% higher than the stock’s last closing price.
Apple’s stock recently traded at 25 times its 12-month forward earnings estimates, compared to Microsoft’s 30.5 times. The Windows maker took the crown as the world’s most valuable company ahead of Apple earlier this year, thanks to its AI efforts.
(Reporting by Aditya Soni in Bengaluru; additional reporting by Lewis Krauskopf and Sinead Carew in New York; editing by Arun Koyyur and Jonathan Oatis)
News Source : finance.yahoo.com
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