By Aditya Soni
(Reuters) – Apple shares rose nearly 6% before the bell on Friday as the iPhone maker's record share buyback plan and promise of revenue growth drew back investors who have shunned the shares over concerns about weak demand and increased competition in China.
The company late Thursday approved another $110 billion in stock buybacks, its largest ever, and forecast third-quarter revenue that exceeded modest market expectations.
The company was on track to add $160 billion to its market value if the stock held up.
The forecast showed Apple was confident that product updates, starting with an iPad event on May 7, would boost demand in the hardware sector after months of sluggish growth, leading some investors to question the stock's must-have status -own-share.
“Many investors began to question whether Apple would still be able to deliver the top-line growth they've become accustomed to over the years, but CEO Tim Cook has turned on the charm and provided investors with some relief,” said Josh Gilbert, analyst at Investment Banking. platform eToro.
The buyback brought Apple into line with other U.S. tech giants that have showered investors with cash this earnings season to allay concerns about rising investment in generative AI. Some analysts also saw it as a sign that the industry was maturing.
“Growth stocks need to demonstrate that they are still growing at a pace that satisfies their shareholders. Once that growth slows, and Apple is a good example of this, buybacks or dividends can convince investors to keep the confidence,” says Danni Hewson, head of financial analysis. at AJ Bell.
Unlike Alphabet and Microsoft, Apple has not seen a cost increase because it has not made major AI investments. But the slow rollout of AI services is being punished by investors, which has partly contributed to the 10% decline in the share price this year.
CEO Cook said Apple plans to share “some very exciting things,” fueling expectations among several analysts that Apple would announce AI integrations at its upcoming annual developer conference, which is expected to be the largest ever.
Bernstein analysts said they expected “a strong iPhone 16 cycle, driven by AI functionality and extended replacement cycles.”
At least thirteen analysts have raised their price targets on Apple, pushing the average price to $200, which is 15% higher than the stock's last close.
Apple shares trade at 25 times forward 12-month earnings estimates, compared to 30.5 times for Microsoft. The Windows maker had taken the crown of the world's most valuable company from Apple earlier this year, thanks to its AI efforts.
(Reporting by Aditya Soni in Bengaluru; Editing by Arun Koyyur)
