Aditya Soni
(Reuters) – Apple shares jumped 7% on Friday as the iPhone maker’s record share buyback plan and promise of sales growth brought back investors who had shunned the stock on concerns about weak demand and increased competition in China.
Late Thursday, the company forecast fiscal third-quarter sales would exceed modest Wall Street expectations.
It also approved an additional $110 billion in share repurchases, the largest ever approval for a share repurchase by a U.S. company, according to EPFR analyst Winston Chua.
Friday’s stock gain added nearly $200 billion to Apple’s (NASDAQ:) market cap, pushing it to $2.86 billion, behind only Microsoft (NASDAQ:) at $3 trillion.
At Friday’s share price, completing Apple’s full buyback would mean buying back nearly 4% of the company’s shares.
Apple’s forecast showed the company is confident that product updates, starting with the iPad unveiling on May 7, will drive demand in its hardware business after months of sluggish growth that have led some investors to question its status as a must-own stock.
“Many investors began to wonder whether Apple still had what it took to achieve the maximum growth they had become accustomed to over the years, but CEO Tim Cook turned on the charm and offered investors relief,” said Josh Gilbert, an investment analyst at companies. eToro platform.
The buyback brings Apple closer to other U.S. tech giants, which have showered investors with cash in recent earnings seasons to calm concerns about growing investments in generative artificial intelligence. Some analysts also saw it as a sign that the industry is maturing.
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“Growth stocks need to demonstrate that they are still growing at a rate that satisfies their shareholders. Once that growth slows, with Apple being a prime example, then buybacks or dividends could convince investors to keep the faith,” said Danny Hewson, head of financial research. in A. J. Bell.
Unlike Alphabet (NASDAQ:) and Microsoft, Apple hasn’t seen costs rise because it hasn’t made large investments in artificial intelligence. But the slow adoption of artificial intelligence services has been punished by investors, partly responsible for the company’s share price falling 10% this year.
CEO Cook said Apple plans to share “some very exciting things,” raising expectations among some analysts that Apple will announce artificial intelligence integration at its upcoming annual developer conference, which is expected to be the largest in history.
Bernstein analysts said they expect “a strong iPhone 16 cycle driven by AI functionality as well as extended replacement cycles.”
At least 13 analysts raised their target price for Apple shares, raising the median price to $200, 15% above the stock’s last closing price.
Apple shares recently traded at 25 times 12-month expectations, compared with Microsoft’s 30.5. Earlier this year, the Windows maker was awarded the title of world’s most valuable company by Apple thanks to its efforts in artificial intelligence.