Goldman Sachs strategist David Kostin thinks a stock buyback “bonanza,” led by Apple, is on the horizon with corporate cash balances flush again as businesses recover from the various and sundry responses to COVID-19.
Brian Sozzi for Yahoo Finance:
Kostin estimates a 35% increase in share buybacks this year and a 5% pop in 2022. Share buybacks from U.S. companies through April have tallied $484 billion, more than double the pace at this same point last year. It marks the quickest pace of U.S. buyback announcements to kick off a year since 2016 ($400 billion).
Tech heavyweight Apple just authorized the repurchase of an additional $90 billion in stock following a banner first quarter of iPhone, iPad and AirPod demand. Insurance giant Travelers recently lifted its stock buyback plan by $5 billion.
“We don’t intend to build up a bunch of excess cash on the balance sheet… and we think that share buybacks are a way to return value to shareholders in a way that is responsible steward of capital, but also maintain a level of balance sheet flexibility for us to continue to be strategic,” Netflix CFO Spence Neumann told analysts on an April 20 earnings call. Netflix has a $5 billion stock buyback authorization in place, and plans to begin buying back shares in the second quarter.
“We’re buying back stock because our cup runneth over,” JPMorgan CEO Jamie Dimon said on an April 14 earnings call. In late December 2020, JPMorgan authorized a new $30 billion stock buyback plan.
MacDailyNews Take: Add up all of the planned stock buybacks of the three companies mentioned (Travelers, Netflix, and JPMorgan) and, totaling $40 billion, they don’t even add up to half of Apple’s massive buyback plan. As of January 2021, prior to Apple’s latest $90 billion increase, Apple had spent $380 billion to repurchase 10.6 billion shares at an average price of $35.80 per share since starting share repurchases in 2013.
“When looking back at Apple’s share buyback activity, one event stands out: passage of the Tax Cuts and Jobs Act of 2017. Prior to U.S. tax reform, Apple was constrained in terms of the amount of cash that could be spent on buyback. The company was penalized for bringing foreign cash back to the U.S. to fund share buyback,” Neil Cybart writes for Above Avalon (“Apple Won the Share Buyback Debate”). “Apple kept share buyback to a $30 billion to $45 billion per year pace despite having more than $150 billion of net cash on the balance sheet. Following U.S. tax reform, Apple was able to repatriate its foreign cash at more attractive tax rates. Apple’s share buyback pace shot higher and has been trending at $70 billion per year.”
Shouldn’t all that buyback start being reflected in the share price? Less shares available should mean each share is worth more. Sad that it isn’t happening that way.
Apple shares will be appreciated sooner or later when the buy back is done or almost done.
Fewer.
https://www.merriam-webster.com/words-at-play/fewer-vs-less
As a share repurchase program, there are the same amount of shares, just a change of ownership.
The repurchased shares are retired, thus lowering the number of outstanding shares.
Yep. You are 100% right. Apple’s stock is actually DOWN for the year, despite tens of billions in buy backs. Apple would rather incinerate the cash than return it to share holders by dividends.
But their stock hasn’t gone down to $100 per share as predicted by so many so emphatically on this site.
After back-to-back stellar earnings, why would Apple’s share price be predicted to drop that low? No other tech company has been faring that badly during the pandemic to take such losses, so why should Apple. It’s true that Apple is a Dow laggard, but that’s simply because Apple has lost favor as an innovative tech company to the likes of Tesla. Apple is still selling plenty of products and making plenty of money. However, Apple has the weakest price target gains of all the FANGs, so maybe aggressive investors would prefer to go with those other tech companies. Investors certainly want to make as much money as possible, so it’s understandable.
My comment was more directed to those who predicted that the sky and stock would be falling to such numbers due to some sort of governmental change from Apple’s home country.
I don’t think that we’ve exchange comments, probably because I nod in the affirmative with most of what you say. Thanks for all the posts you’ve made over the years. It’s nice to see people stick to the topic at hand.
Cheers.
Share buy-backs used to be illegal. It was thought to be a form of manipulation.
Then, everyone seemed to buy into the idea that some forms of manipulation are ok.
Of course, Jamie…the way to solve the cup runneth over “problem” is to give back to yourself.
Is Apple’s buyback plan really all that good or should I say attractive to investors? Apple’s share price doesn’t seem as though it has gotten any boost in value from the buybacks although the EPS is up and the P/E has been lowered. I think about 4% of outstanding shares have disappeared. Apple simply doesn’t seem all that attractive to investors despite back-to-back record-breaking quarterly earnings. Lowly Boeing which seems to be constantly losing money is actually outperforming Apple over the last 52 weeks by a good margin. It would be nice if Apple used some of that buyback money to acquire a movie studio or more TV content for video streaming. I think more people could appreciate the use of that money.
Boeing isn’t lowly. It’s the biggest US manufacturer. Despite being under the microscope constantly, they have an amazing record of quality and performance and safety. Always have, even with the much publicized 737 setbacks. Americans should wish Boeing well and get flying again.
Despite all fanboy faith to the contrary, simple observations of AAPL show that Apple’s buyback plans have done next to nothing for share price. That isn’t the intent either. Apple buys back shares so that it doesn’t have to pay out as much in dividends to investors. The practice should have remained illegal but big banks and rich electronics firms these days get whatever deregulation they desire.
Apple’s stock price is closely tied to future income projections, which are overwhelmingly dependent on the iPhone and its app store, which is under scrutiny right now. So relax until after the WWDC to see if Apple has an innovation to gain new customers. All its legacy products are reaching market saturation (at least at the prices Apple charges).
Also, when considering Apple’s income from media, don’t forget that former fanboys at MDN have gone off the political deep end. They hate everything Apple does now. The fortunes of Apple will be severely damaged by the half dozen whiners here complaining about every cotton pickin little thing Apple does. That has gotta hurt Timmy deeply. Take $0.000000000000001 off your Apple stock valuation estimate.
Apple’s share price has not moved up a bit with all the buy backs. Institutional investors avoid Apple as their dividend payment is far too low. Instead of incinerating the cash, Apple should return it to investors. Buy backs give share holders NOTHING.
Based on the long term price of Apple stock I would say stock buybacks haven’t hurt.
See the chart below
https://finance.yahoo.com/quote/AAPL?p=AAPL&.tsrc=fin-srch
Click on the 5 year or Max in the chart
Imagine if Tim Cook had a shred of innovation in his brain and used that money on something productive.
Right, Tim. If Apple management had been halfway competent, the company might be almost as big as Motorola, Nokia, or even Dell by now.
I am also expecting more companies to follow Tesla’s lead and secure value in Bitcoin. How about Apple? Is there Bitcoin in their future?
Apple shares being POUNDED again today as investors run for the exits. The Dow is up nearly 200 points while Apple is down -1% and falling in extremely heavy selling.
So much for those share buy backs helping the stock price.
Apple getting the living sh!t kicked out if it today in the Market, now down -2.6% and plunging into the close. Volumes are staggeringly high as investors run for the exits. Apple stock CRUSHED year to date, while IBM is soaring since reporting earnings.
Well done Tim Cook, well done.