After announcing record revenues and profits for the most recent fiscal year, Apple Inc. is expected to indicate what percentage of its financial success will be passed on to shareholders this year.
The company is expected to increase dividends and allow for further stock repurchases as the company announces its financial second quarter earnings on Wednesday, part of its continued focus on repaying public shareholders. company for the goal of reducing the amount of cash quite large. The company typically updates its payback program with its March quarterly report, and the upcoming announcement could be the driving force behind Apple’s earnings after earnings.
Wells Fargo analyst Aaron Rakers writes: “We think the Apple payback update may be the most incremental consideration of Apple’s upcoming F2Q21 results.
Although Apple’s shares have nearly doubled over the past year, Morgan Stanley’s Katy Huberty predicts that the company will continue to be active with its acquisitions. She predicts that the company may add $ 60 billion to its buyout authorization this quarter, compared with the $ 50 billion increase that Apple approved a year ago.
Huberty argues that Apple’s pace of acquisition is unlikely to “materially slow down” over the next 12 to 18 months, as she predicts that the company could buy back $ 18 billion of its stock every quarter. by the end of fiscal 2022. That would reduce the number of outstanding shares by about 3% and give Apple a net cash position of around $ 75 billion.
She also predicts that Apple’s dividends will increase 10%, which will bring the annual payout to 90 cents a share.
Wells Fargo’s Rakers suggested that Apple’s dividend announcement could be a greater driver of stock performance than an acquisition plan. He argued that Apple could increase its dividend by at least 10%, an increase that would mark the highest annual increase since Apple’s 16% gain in 2018 and stand against a “more modest” increase. is the 5.5% and 6.5% that Apple delivered 2019 and 2020 respectively.
“Our positive stance on the ability to keep creating [free-cash flow] Support our view that the company can return its annual dividend growth trajectory to double digits [percent] scope, ”he wrote.
Rakers expected to raise about $ 50 billion in the buyback program, equal to a year ago.
The company has set a goal of becoming net cash neutral, opting against blockbuster acquisitions and in favor of capital gains as it tries to narrow its sizable net cash balance, at over $ 80 billion. as of the time of Apple’s final report. But Apple is also generating strong free cash flow, with Huberty predicting a 30% increase this fiscal year and suggesting that it will take time before Apple reaches its goal.
“Apple is mining across all of its headquarters today, and even though it spends close to $ 100 billion a year on shareholder returns, we believe the path to a net cash neutral position. will require many more years to have strong and sustainable shareholder returns ”, wrote Huberty.
Rakers noted that Apple acquired an average of 2.5 million shares per day in the last 9 months of 2020, accounting for about 1.6% of the stock’s daily trading volume.
What to expect
Income: Analysts tracked by FactSet expect Apple to earn 98 cents a share in the most recent quarter, up from 64 cents a year earlier. According to Estimize, which collects predictions from hedge funds, scholars and others, estimates the average is $ 1.02 a share.
Revenue: The FactSet consensus modeled revenue at $ 76.7 billion, while the Estimize average estimate is $ 78.3 billion. Apple posted $ 58.3 billion in revenue for the quarter before March, as the COVID-19 shutdown affected China and began causing store closures in other parts of the world. .
Ancient movement: Apple shares have fallen after three of the previous earnings year. Stocks have risen 91% over the past 12 months as the Dow Jones Industrial Average
of which Apple is a component, has increased 44%.
Of 42 analysts tracked by FactSet, who include Apple stock, 30 have a buy rating, nine have a hold rating and three have a sell rating, with an average price target of 151.12 dollars.
What else is there to see
Apple has seen strong momentum in recent quarters as demand for Macs and iPads skyrocketed during the pandemic and the successful launch of the iPhone 12. Evercore ISI Analyst, Amit Daryanani, predicts that the company continues to gain good charisma in the third quarter and may deliver results beyond expectations.
Daryanani argued that the company could further isolate others from the persistent shortage of chips due to “its position as one of the world’s largest electronics buyers,” argues Daryanani, noting at the same time while production partner Foxconn
Having mentioned some supply issues, the company said that the component shortage will affect a small part of customer orders.
Daryanani is optimistic about Apple’s iPhone growth in China and is encouraged by Foxconn’s Foxconn indicator that Q3 performance will be better than what is typically seen during this period. That is in line with Apple’s own predictions, he noted. He rates the stock better with a $ 175 price target.
Wells Fargo’s Rakers pointed out “the driving forces behind the on-going positive demand” but said he was “reluctant to make a meaningful bullish call (towards the iPhone)” before the release. His iPhone revenue estimate for the quarter was $ 38.8 billion, while the FactSet consensus calls for $ 41.0 billion.
In addition to iPhones, Rakers expects that the company continues to see strong demand for iPads and Macs driven by momentum at home. He will also seek broader comment on supply issues.
“With ongoing reports of the overall tightening of the semiconductor supply chain, probably affecting Apple’s Mac and iPad lead time, along with the DRAM price hike, investors will focus on Apple’s thinking about meeting overall needs and gross profit expectations, ”he wrote, reiterating the stock excess rating and $ 160 target price.
Morgan Stanley’s Huberty has “high confidence” that Apple will surpass Q3 expectations and she is also expecting an optimistic outlook.
“We believe much of the strength of the consumer and education markets drove the Mac and iPad to grow 21% year-on-year and 41% y-o-y in the December quarter. maintenance and even acceleration in the March quarter, ”she wrote, highlighting optimistic third-party Mac data from IDC.
Huberty forecasts Mac revenue of $ 8.2 billion and iPad revenue of $ 6.8 billion for the quarter, significantly higher than FactSet consensus, at $ 6.7 billion and 5.6 billion respectively. billion USD. She has an overweight rating and a price target of $ 158 on Apple shares.
apple Recently introduced iPad and iMac that could allow it to continue taking advantage of the trends at home, although these won’t affect the numbers for the March quarter.