Apple Surges 7.9% After $110B Buyback, Earnings Win

Key Takeaway

• Apple announces a record $110 billion stock buyback, signaling a shift towards valuing shareholder returns, alongside an earnings beat with $1.53 EPS on $90.75 billion revenue.
• Despite a 4% sales decline and challenges in China, Apple's stock surged up to 7.9%, potentially increasing its market value by over $190 billion.
• Faces regulatory scrutiny in the U.S. and EU but remains optimistic about the Chinese market with strong iPhone sales and active device numbers.

Record Buyback Announcement

Apple Inc. announced an unprecedented $110 billion stock buyback program, the largest in U.S. history, surpassing its own previous records and those of other major corporations. This move is seen as a shift towards valuing shareholder returns, with Steve Sosnick, chief strategist at Interactive Brokers LLC, noting Apple's transition towards a value stock. The announcement places Apple at the forefront of U.S. corporations in terms of share repurchase volumes, alongside Chevron Corp. and Alphabet Inc. This strategic decision underscores Apple's commitment to returning value to its shareholders amidst a broader market context of cautious expansion and investment in innovation.

Quarterly Performance Exceeds Expectations

Apple's recent quarterly earnings report exceeded analysts' expectations, with the company posting earnings of $1.53 per share on revenue of $90.75 billion, against the anticipated $1.50 per share on revenue of $90.01 billion, according to LSEG. Despite a 4% decline in overall sales and a 10% drop in iPhone sales year over year, Apple's performance signaled a potential return to revenue growth in the upcoming period. The company also increased its quarterly dividend for the twelfth consecutive year, reflecting its optimism in overcoming recent market challenges. Following the earnings announcement, Apple's stock surged by up to 7.9% in post-market trading, indicating strong investor confidence and a potential increase in market value by over $190 billion.

Challenges in China and Regulatory Pressure

Apple continues to navigate significant challenges in China, its third-largest market, where sales have been declining. The company reported a slowdown in sales in the greater China region, with iPhone sales falling 33% in February, marking the second consecutive month of declining shipments. Despite these challenges, Apple CFO Luca Maestri expressed optimism about the Chinese market, highlighting strong iPhone sales and a record number of active Apple devices in the region. Additionally, Apple faces regulatory scrutiny from U.S. and EU antitrust enforcers, with ongoing lawsuits and investigations that could influence its operational strategies and market positioning.

Street Views

• Bank of America Analysts (Bullish on Apple):

  "Apple is growing iPhones in Mainland China, estimate revisions are turning positive and GenAI features will drive a strong upgrade cycle."

• JPMorgan Analysts (Bullish on Apple):

  "Resilient year-over-year iPhone revenues and expectations of an upgrade cycle-led tailwind in iPads ahead of Apple’s product launch event next week... it now provides visibility into higher revenue opportunities in the coming years with tailwinds from product cycles across hardware devices as well as an AI-led smartphone cycle further boosting growth."

• Morgan Stanley Analysts (Bullish on Apple):

  "It’s hard not to get more bullish here."

Management Quotes

• Tim Cook, CEO of Apple:

  "Quarterly sales suffered from a difficult comparison to the year-earlier period."