After the largest buyback in history, where will Apple go next?
After Apple Inc. released its financial report and announced a $110 billion stock buyback plan, the stock price rose nearly 6%. However, analysts at Seeking Alpha hold a different opinion, believing that Apple faces the risk of losing market share and uncertainties in growth prospects. While the stock buyback plan is beneficial in mitigating short-term risks, there are still risks due to the lack of support for growth investment returns. Investors are optimistic about Apple's cash flow and stock buyback plan, but some institutions remain cautious about the buyback frenzy. Overall, market opinions on Apple's future direction vary
According to the Zhītōng Finance APP, due to investors' excitement over Apple's (AAPL.US) latest financial report and announcement of a $110 billion stock buyback, the company surged nearly 6% on Friday. In addition, the company also raised its dividend.
While the entire Wall Street welcomed this news, analysts at Seeking Alpha have differing views, with several analysts expressing bearish sentiments. Here are some key points raised by the SA authors:
LivyInvestment Research pointed out in the article "The $110 Billion Buyback Masks Apple's Poor Performance in Q2 2024": "Despite Apple's large installed base of devices, the risk of market share loss continues to increase due to the lack of artificial intelligence integration... We believe that Apple's continued generous stock buybacks are an important tool for the stock to withstand short-term adverse factors facing its fundamental prospects. However, the persistence of the valuation premium at the current level remains at risk due to the lack of supportive growth investment returns."
Victor Dergunov wrote in "Apple: Growth Issues Masked by Buybacks and Dividends": "Apple has been stagnant for years... Its stock price remains almost unchanged from 2021. While dividends and buybacks may support Apple's stock price in the short term, the stock may fluctuate sideways in the absence of clear growth prospects."
In the article "Apple's Asian Investors: Accelerating Capital Returns," it is stated: "The strongest factor for investing in Apple is that the company is generating a large amount of free cash flow, which will be returned to shareholders through a generous $110 billion stock buyback plan. With the stock price below fair value and the company repurchasing approximately 4% of outstanding shares, despite negative growth in Q2 FY24, I still believe upgrading the rating to 'Strong Buy' is very reasonable."
Cavenagh Research expressed in "Apple: Expect Smart Investors to Sell the $110 Billion Buyback Frenzy" that despite the impressive buyback amount, potential business trends are still concerning. The institution stated, "Compared to the same period in 2023, Apple's business has declined, with a significant drop in iPhone sales. In addition, Apple's potential growth drivers, especially the VisionPro and GenAI plans, still have unclear prospects and may be difficult to convince."