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Is Apple’s stock buyback just a patch on a sinking Titanic?

Is Apple’s stock buyback just a patch on a sinking Titanic?
Elmaz Sabovic

Apple (NASDAQ: AAPL) not only surpassed analysts’ expectations with its earnings but also unveiled some additional pleasant surprises during the presentation. Firstly, quarterly dividends increased from $0.24 to $0.25, likely to please many investors.

Another highlight is the announcement of a $110 billion share buyback program. This initiative aims to boost share value, increase Apple’s ownership of AAPL stocks, and take advantage of the current stock undervaluation.

However, concerns have been raised about the size of the industry’s most extensive share buyback program ever. Some believe that the $110 billion allocation is excessive, especially given the current state of the stock market and the decline in iPhone sales.

The math doesn’t add up

A significant problem for a keen investor is that Apple’s net income for the recent period stood at $23.6 billion, reflecting a decline compared to the previous year, indicating a discernible trend.

Apple's operating and net income. Source: Apple
Apple’s operating and net income. Source: Apple

When considering the figures, it becomes evident that Apple’s announced $110 billion buyback program is a significant sum to their anticipated annual income of approximately $100 billion. 

Additionally, it is imperative to address Apple’s liabilities-to-assets balance, which currently appears to be at a level that needs to be improved for a buyback program of this size.

Nevertheless, AAPL stock surges

As is tradition, after a positive earnings report, AAPL stock surged 5.95% in the pre-market trading, extending gains of 2.20% from the latest trading session.

This after-hours gain has propelled AAPL’s share price from $173.03 at the time of closing to $183.32 at the time of writing, with the potential of further gains before the market’s opening on May 3.

AAPL stock 24-hour price chart. Source: Google Finance
AAPL stock 24-hour price chart. Source: Google Finance

Although good news initially, the historic $110 billion share buyback program might prove to be more than Apple could handle, negatively affecting the company and its stock.

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