Last week, Apple (AAPL) reported financial for the first quarter of calendar 2019, and they were pretty good, but Apple stock is largely dependent upon macro forces and the effects of their own capital return until the next major product cycle. It is all about the buyback.
Apple’s buyback increase is larger than expected
Apple is still wildly profitable and holds significant cash. Many have argued for the company to make a transformative acquisition with some of that cash, but so far the company has largely opted to hold cash and buy back shares while slowly increasing the dividend. The buyback has become incredibly important for share support and momentum. The dividend is growing, but it is far less important than the buyback.
Between 2016 and 2018, Apple bought back, each quarter, somewhere between $6 billion and $11 billion worth of shares. In the Spring of 2018, the company massively increased their buyback and acquired between $19.4 billion and $23.5 billion per quarter, roughly tripling the average quarterly buyback in dollar terms.
Apple significantly reduced the buyback pace at the end of 2018. According to the company’s consolidated financial statement, it repurchased just under $8.8 billion in stock in the holiday quarter. Apple has since resumed buying back stock at a more robust pace, and repurchased $24 billion last quarter. Apple also reported it would increase its repurchase program by $75 billion.
With Apple’s newly fortified repurchasing, it is possible the company will reduce share count by as much as ten percent within 2019, and possibly more.
Passive buying will continue
Apple is one of the largest companies in the world. It is among the largest constituents of the S&P 500 and the Dow Jones Industrial Average. It is also generally one of the top holdings of total market funds,