Is Apple ‘Wagging the Dog’ With Stock Buyback?
Earlier this week, Apple (NASDAQ:AAPL) CEO Tim Cook told the Wall Street Journal that the company had recently repurchased $14 billion of its own shares in an “opportunistic” move that took advantage of a decrease in the share price following its disappointing earnings results. The move appeared to please most Apple investors and many analysts subsequently adjusted their earnings per share estimates for Apple’s current quarter based on the impact of the stock buyback.
According to Barron’s, Barclays analyst Ben Reitzes estimated that the $14 billion buyback would boost EPS by “a little over 2 percent,” while BMO Capital Markets analyst Keith Bachman added about nine cents to his previous EPS estimate. The move also likely pleased activist investor Carl Icahn, who has been aggressively pushing Apple to expand its share repurchase program by another $50 billion.
However, not every analyst was enamored by Apple’s accelerated share repurchase activity. In a recent note to investors, J.P. Morgan analyst Mark Moskowitz argued that Apple’s stock buyback failed to resolve more pressing issues facing the company. “We think event-driven and capital- focused investors could cheer the news of Apple’s buyback bonanza,” wrote Moskowitz in a note obtained by Barron’s. “However, we do not think this buyback activity overcomes the slowdown in the all-important iPhone business.”
“The last two iPhone launches have not resulted in multi-quarter sales growth spurts as previously seen,” added the J.P. Morgan analyst. “We think this lack of follow-through indicates end users are slowing their refresh rates, and recent technology advancements have not been enough to change that. This dynamic is the bigger issue, in our view, and likely will remain so after any near-term excitement related to the buyback.”