Given all the chatter, Apple (AAPL) had better increase its program for repurchasing Apple stock when it reports results next week … or a lot of investors are going to be very disappointed.
And that most assuredly won’t be good for Apple stock, at least in the short run.
Analysts at Bernstein Research were the latest to weigh in with a prediction on the AAPL buybacks plan, a hike to which seems all but certain if the hive mind is right.
With the launch of the iPhone 6 not expected until the fall and a potentially disappointing quarter already in the books, Apple stock watchers figure the company will pledge to even more AAPL buybacks and perhaps even hike Apple’s dividend to keep shareholders happy amid lackluster results.
Analyst Toni Sacconaghi wrote in a client note:
“We believe that Apple may add $30 billion to its current repurchase plans through year-end CY15.”
Apple is committed to repurchasing $60 billion in AAPL by the end of 2015, and has already bought back $45 billion to $60 billion worth of Apple stock, the analyst estimates.
A number of analysts also expect the company to hike the dividend paid on Apple stock by 10% to 20% when it releases quarterly results on April 23.
Apple Stock Buyback Already Priced In?
However, with an increase in Apple buybacks and a hike to the AAPL dividend now widely expected, the positive punch from any such new might already be blunted.
So if returning more cash to shareholders is intended to appease a market upset over disappointing quarterly results … well, a small hike in the dividend and a modest addition to Apple stock repurchases is unlikely to offset selling in the immediate aftermath of the report.
As we noted recently, an ugly quarter is a distinct possibility. Analysts at BMO Capital Markets think Apple earnings will come up short of expectations with a wide miss on revenue.
That would be especially painful for Apple stock considering that Wall Street is already modeling a weak quarter, with revenue flat year-over-year. Earnings per share are expected to increase by less than 1%.
Apple has more than enough cash to hike the dividend and lift its commitment to buybacks, so no harm done if it does. Indeed, past moves of the same sort have helped support Apple stock.
As everyone knows, however, what AAPL really needs are some blow-out hits when it unveils new goodies later this year.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.