Apple shares surged 7% on Friday, boosted by the iPhone maker’s robust stock buyback program and optimistic sales forecasts, attracting investors who had previously been cautious due to concerns about soft demand and heightened competition in China.
Late on Thursday, the company announced fiscal third-quarter sales projections that exceeded Wall Street’s modest predictions and approved an additional $110 billion for share repurchases, marking the largest buyback authorization ever granted by a U.S. firm, according to EPFR analyst Winston Chua.
The stock’s rise on Friday added nearly $200 billion to Apple’s market capitalization, bringing it to $2.86 billion, making it second only to Microsoft, which is valued at $3 trillion.
At the current stock price, executing Apple’s entire buyback authorization would entail repurchasing almost 4% of the company’s shares.
Apple’s optimistic forecast indicates confidence in upcoming product updates, starting with an iPad event scheduled for May 7, which is expected to stimulate demand in its hardware division after a period of sluggish growth that had led some investors to question its status as a must-have investment.
The buyback initiative aligns Apple with other major U.S. tech firms that have been returning capital to investors in recent earnings cycles to alleviate concerns about escalating investments in artificial intelligence (AI). Some analysts interpret this move as a sign of industry maturation.
Unlike Alphabet and Microsoft, Apple has not experienced a surge in costs associated with significant AI investments. However, the gradual rollout of AI services has been met with investor dissatisfaction, contributing in part to the 10% decline in Apple’s share price this year.
CEO Cook’s announcement of plans to unveil “some very exciting things” has fueled speculation among analysts that Apple will introduce AI integrations at its upcoming annual developer conference, anticipated to be the largest ever.
Bernstein analysts anticipate a robust iPhone 16 cycle driven by AI capabilities and prolonged replacement cycles.
At least 13 analysts have raised their target price for Apple, with the median projection reaching $200, representing a 15% increase over the stock’s previous closing price.
Apple’s stock is currently trading at 25 times its 12-month forward earnings estimates, compared to 30.5 for Microsoft, which surpassed Apple as the world’s most valuable company earlier this year, largely due to its AI initiatives.
