Apple has witnessed a 7% surge in its stock price, driven by the tech giant’s announcement of promising sales growth projections and a record stock buyback plan, which attracted investors who had been cautious over Apple’s weak demand and increased competition in China.
Last Thursday, Apple revealed forecasts for fiscal third-quarter sales that surpassed Wall Street’s expectations. Additionally, the company approved an additional $110 billion in share repurchases, marking the largest ever buyback authorisation by a U.S. company, according to EPFR analyst, Winston Chua.
Following Friday’s stock gain, Apple’s market capitalisation soared by nearly $200 billion, reaching $2.86 trillion, second only to Microsoft which boasts a worth of $3 trillion.
Apple’s ambitious buyback plan indicates confidence in its future growth prospects. The company aims to repurchase nearly 4% of its shares at the current stock price, demonstrating its commitment to enhancing shareholder value.
Investor confidence in Apple’s growth potential was further bolstered by CEO Tim Cook’s reassurance during the announcement. Cook’s optimism, coupled with anticipation for upcoming product updates starting with an iPad event on 7th May, contributed to the renewed interest in Apple’s stock.
Apple’s decision to implement a buyback aligns with that of other U.S. tech giants, which have utilised share repurchases to ease concerns about rising investments in generative AI and demonstrate maturity in the industry.
Apple’s Plans for AI services
Despite Apple’s slower rollout of AI services compared to its counterparts like Alphabet and Microsoft, Cook hinted at exciting developments to be shared at the upcoming annual developer conference, fuelling speculation about AI integrations.
According to Reuters, analysts at Bernstein are anticipating a strong iPhone 16 cycle fueled by AI functionality and prolonged replacement cycles. Consequently, at least 13 analysts have raised their target price on Apple, with the median view now standing at $200, representing a 15% increase from the stock’s last closing price.
Apple’s stock currently trades at 25 times its 12-month forward earnings estimates, compared to 30.5 for Microsoft, which recently surpassed Apple as the world’s most valuable firm, partly due to its AI efforts.
