Apple poised to boost buybacks by US$90b, Citi says

[LONDON] For years, Apple has been at the forefront of multi-billion dollar stock repurchases among technology mega-caps. According to Citigroup analyst Jim Suva, it may be about to raise its game.

In a note published Tuesday (Apr 12), Suva estimated that the iPhone maker might announce a buyback of US$80 billion to US$90 billion, while also increasing its dividend by 5 per cent to 10 per cent. All eyes will be on its second-quarter results due after the closing bell on Apr 28.

With their coffers filling fast, companies including Alphabet and Microsoft have been looking for ways to employ excess cash. Apple's repurchases have totalled US$274.5 billion, including US$20.4 billion in the December quarter alone. Yet the company still has cash of more than US$200 billion on the balance sheet, and with authorisation to purchase up to US$315 billion of stock, has scope to do a lot more.

"We expect Apple to add as much as US$300 billion to share repurchases following 2Q results as availability wanes in its existing programme," Robert Schiffman, Bloomberg Intelligence senior credit analyst, wrote in a report last week, noting that the company historically reloads the repurchase programme following the second quarter.

The Cupertino-California-based company had increased its buyback programme by US$90 billion and hiked its dividend by 7 per cent last April, along with its announcement of second-quarter results.

Apple shares have fared better than peers this year, falling 6.7 per cent versus the 14 per cent drop of the tech-heavy Nasdaq 100 index. That's despite reports of production difficulties that Suva says "could provide a near-term stock pullback which we would use as a buying opportunity".

According to the Citi analyst, the company's current market value does not reflect potential new product category launches such as augmented reality/virtual reality headsets and the Apple car.

Apple shares rose as much as 2.5 per cent on Tuesday as US stocks advanced after a report showed core inflation increased less than forecast in March. The Nasdaq 100 index was up 1.2 per cent at 11.50 am in New York. BLOOMBERG