Aditya Soni
(Reuters) – Apple shares jumped nearly 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 approved an additional $110 billion share buyback, its largest ever, and forecast third-quarter sales that beat modest market expectations.
The company was on track to increase its market value by more than $170 billion if the stock’s gains continued.
The forecast showed Apple (NASDAQ:) 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 had some investors questioning 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 this earnings season to calm concerns about growing investment in generative artificial intelligence. Some analysts also saw it as a sign that the industry is maturing.
“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.
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Unlike Alphabet (NASDAQ:) and Microsoft (NASDAQ:), Apple hasn’t seen costs rise because it hasn’t made major 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 trade at 25 times 12-month earnings estimates, compared with 30.5 for Microsoft. The Windows maker took the crown of the world’s most valuable firm from Apple earlier this year thanks to its efforts in artificial intelligence.