Apple’s shares (AAPL.O) soared by 7% on Friday, buoyed by the tech giant’s ambitious stock buyback program and promising sales outlook. Investors, previously wary due to concerns over soft demand and heightened competition in China, returned to the stock in droves.
Late on Thursday, the company announced a fiscal third-quarter sales forecast that surpassed Wall Street’s conservative estimates. Additionally, it greenlit an additional $110 billion in share repurchases, marking the largest buyback authorization ever granted by a U.S. company, according to EPFR analyst Winston Chua.
Apple’s optimistic forecast reflects confidence in upcoming product updates, beginning with an iPad event slated for May 7th. These updates are expected to reinvigorate demand in Apple’s hardware business after a period of lackluster growth that raised doubts among some investors.
“Many investors had started to question whether Apple could maintain its historic growth trajectory, but CEO Tim Cook’s reassurances provided a much-needed boost,” remarked Josh Gilbert, analyst at investment platform eToro.
“Growth stocks need to demonstrate sustained growth to satisfy shareholders. When growth slows, as seen with Apple, buybacks or dividends can help retain investor confidence,” explained Danni Hewson, head of financial analysis at AJ Bell.
Unlike Alphabet and Microsoft (MSFT.O), Apple has not faced significant cost increases due to major AI investments. However, its gradual adoption of AI services has been met with investor skepticism, contributing to a 10% decline in its share price this year.
CEO Cook hinted at forthcoming developments, stoking anticipation among analysts for AI integrations to be announced at Apple’s upcoming annual developer conference, expected to be its largest ever.
Apple’s stock currently trades at 25 times its 12-month forward earnings estimates, compared to Microsoft’s 30.5. Earlier this year, Microsoft surpassed Apple as the world’s most valuable company, propelled by its AI initiatives.
