How productive has tech giant Apple's (AAPL -1.14%) stock buyback program been?
The short answer is that it's been extremely effective in enhancing shareholder value since its 2012 inception. Yet stock repurchases have continued unimpeded in recent quarters, even as the Mac maker's stock price has soared in anticipation of the company's forthcoming redesigned iPhone.
So is Apple at risk of destroying shareholder value by overpaying for its own shares? Let's look at the most recent update on Apple's buyback program and consider how investors should understand it in light of the market's increased bullishness on Apple stock.
Apple's buybacks continue
In its recent earnings report, Apple supplied a supplemental update to its capital return program. The document shows that the pace of the tech giant's share repurchases continued at full steam during the company's fiscal second quarter. Here's a snapshot of Apple's past five quarters of buyback data:
| Time | Open Market Purchases | Accelerated Share Repurchases | Total |
|---|---|---|---|
| Q2 FY 2016 | $7.0 | $0.0 | $7.0 |
| Q3 FY 2016 | $4.0 | $6.0 | $10.0 |
| Q4 FY 2016 | $3.0 | $3.0 | $6.0 |
| Q1 FY 2017 | $5.0 | $6.0 | $11.0 |
| Q2 FY 2017 | $4.0 | $3.0 | $7.0 |
Data source: Apple investor relations.All figures in billions.
Looking back by fiscal year, we see Apple has accelerated the pace of its buybacks in recent quarters, even as its stock price continues to climb.
| Time |
Open Market Purchases |
Accelerated Share Repurchases | Total |
|---|---|---|---|
| FY 2013 | $9.0 | $14.0 | $23.0 |
| FY 2014 | $24.0 | $21.0 | $45.0 |
| FY 2015 | $30.0 | $6.0 | $36.0 |
| FY 2016 | $17.0 | $12.0 | $29.0 |
| Last 12 months | $16.0 | $18.0 | $34.0 |
Data source: Apple investor relations.All figures in billions.
All told, Apple has repurchased a whopping $151 billion in shares since 2012. And in its latest earnings report, Apple's board of directors approved another expansion of its capital return program. The total dollar value allocation now stands at a cool $300 billion, $210 billion of which is earmarked specifically for share repurchases.
But we have to ask again: With Apple's valuation metrics pushing against all-time highs, could Apple be destroying shareholder value, especially if shares continue to climb?
Image source: Apple
Are Apple shares still a buy?
Wall Street currently rates Apple stock as a buy, even as shares hover around the consensus 12-month price target of $154.36. It may be fair to say that most of Apple's near-term upside has already been baked into its stock price.
Yet Apple remains cheaper than the broader market, and the market still hasn't fully appreciated its long-term return potential. Its P/E multiples remain well below those of the market, at 19 times current earnings and 14 times forward earnings, compared with 25 times earnings for the S&P 500. And that doesn't even back out the massive net-cash balance on Apple's balance sheet.
In the medium to long term, Apple is working to establish itself in many of tech's most important future growth markets. And in the short term, of course, the coming iPhone 8 should trigger a wave of upgrades and new purchases that will improve Apple's financial performance even further.
So plenty of upside remains for the Mac maker. Investors should continue to see its shares as an attractive investment today.
