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Equities

Apple's $110B Buyback Amid iPhone Sales Dip, China Woes

Apple announces record $110 billion buyback amid strong Q2 earnings, despite iPhone sales dip and China market challenges.

By Bill Bullington

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5/5, 07:13 EDT
Apple Inc.
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Key Takeaway

  • Apple announces a record $110 billion stock buyback, yet analysts caution it may not ensure stock outperformance.
  • Despite exceeding Q2 earnings expectations with $1.53 EPS on $90.75 billion revenue, iPhone sales dropped 10% YoY.
  • Challenges in China with a 33% drop in iPhone sales, but optimism remains for recovery and AI-driven product upgrades.

Record-Setting Buyback Program

Apple Inc. announced a groundbreaking $110 billion stock buyback program, the largest in the history of U.S. corporations. This move is part of Apple's ongoing strategy to return value to shareholders and is seen as a significant factor contributing to the company's stock price surge of up to 7.9% following the announcement. Despite this, some analysts, including Dan Nathan from RiskReversal Advisors, question the impact of such buybacks on the stock's performance, noting that Apple's stock has underperformed compared to the Nasdaq despite previous repurchases.

Quarterly Earnings Exceed Expectations

Apple reported fiscal second-quarter earnings that surpassed analysts' expectations, with earnings of $1.53 per share on revenue of $90.75 billion. This performance exceeded the forecasted earnings of $1.50 per share on revenue of $90.01 billion. However, the company also faced a 4% decline in overall sales and a 10% drop in iPhone sales year over year, indicating challenges in maintaining demand for its flagship product. Despite these hurdles, Apple's stock experienced its best day since November 30, 2022, signaling strong investor confidence.

Challenges and Opportunities in China

Apple's performance in China, its third-largest market, presents both challenges and opportunities. The company reported a significant 33% drop in iPhone sales in the greater China region in February, continuing a trend of declining shipments. Despite these setbacks, 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. Analysts from Bank of America, JPMorgan, and Morgan Stanley remain bullish on Apple's growth potential, citing recovery in iPhone sales in Mainland China and the anticipated impact of generative artificial intelligence features on product upgrades.

Street Views

  • Dan Nathan, RiskReversal Advisors (Neutral on Apple):

    "Apple has already been buying back stock, so it doesn’t make a whole heck of a lot of sense for that to fuel a rally... Over the last three fiscal years, on a quarterly basis they’ve been averaging $20 billion in share repurchases. So they’ve been retiring these shares." "They’ve been buying that, and the stock has massively underperformed the Nasdaq. So investors have made the decision that that cash that they have sitting on the balance sheet is probably better off earning that 5% then going back and buying their stock."