Apple Has Bought Back More of It’s Stock Than Any Other Company

by | Jun 21, 2024

Apple Has Bought Back More of It’s Stock Than Any Other Company

It’s no secret that I’m bullish on Apple. A week ago I wrote to you about my prediction that the stock could hit $250 per share by 2025.

And I recently saw an interesting statistic about Apple that I wanted to share with you all today.

Apple has bought back over $429.1 billion worth of its own stock over the last 5 years.

That’s more than any other company in the world. In fact, across all of the companies in S&P 500 added together, there have only been $3.9 trillion in stock repurchases over the last 5 years.

Another interesting fact, S&P 500 companies have spent more on share buybacks than dividends for the last 14 quarters in a row.

Apple alone makes up over 11% of all the stock repurchases from the 500 largest companies!

So why is this important and what does it mean?

Well, companies repurchase their stock for a number of different reasons:

  1. Increase in Shareholder Value: When a company buys back its stock, it reduces the number of shares outstanding. This can increase the earnings per share (EPS), which might make the stock more attractive to investors due to perceived higher profitability per share.

  2. Stock Price Support: Buybacks can be seen as a company expressing confidence in its own value. By buying back shares, the company can help stabilize or increase the stock price. This is particularly useful if the company’s management feels the stock is undervalued.

  3. Excess Cash Utilization: Companies with excess cash might choose to buy back shares as a way to return value to shareholders. This is often viewed as an alternative to dividends, with the advantage of flexibility in terms of how much cash to return and when.

  4. Tax Efficiency: For shareholders, buybacks can be more tax-efficient than dividends. In many jurisdictions, capital gains (which could be realized by selling shares after a buyback increases the price) are taxed at a lower rate than dividends.

  5. Control and Ownership: Buybacks can help reduce the dilution of shares, particularly after periods where employee stock options have been exercised. This can help existing shareholders retain a larger control of the company.

  6. Improve Financial Ratios: By reducing the number of shares outstanding, key financial metrics like return on assets (ROA) and return on equity (ROE) can improve, making the company appear more efficient and financially stable.

  7. Strategic Reasons: Sometimes, companies use stock buybacks as a tool to fend off takeover attempts. By reducing the number of shares available in the market, a hostile takeover becomes more difficult and expensive.

But I don’t think Apple is worried about hostile takeovers with its $3.23 trillion dollar market cap. 

I think we are seeing these buybacks because Apple’s management is extremely bullish on the company. They are seeing the inherent value in Apple’s ability to simply incorporate AI into their existing product lines without even inventing the tech and they’ll be able to take part in the AI boom without the risk of being the AI developers.

They are seeing a future with a lot of potential reward with a very low level of risk due to their strategy. 

Apple is also a cash-rich company; that’s another reason we are seeing these buybacks. In fact, for the final quarter of 2023, Apple had over $73.1 billion in cash, that’s a 42% increase from the year prior, despite all of the buybacks.

These are just a few more reasons I am so bullish on Apple and think we could see its price hit $250 per share by 2025.

— Nate Tucci

P.S. If you want to see a further breakdown of why Apple’s buybacks are so powerful, Jack Carter talks about it in detail as one of his Golden Rules for Profit Sharing Payments.

^^ I couldn’t agree more with Jack on this concept so I recommend taking a look.

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