BMO Capital Markets analysts Keith Bachman, Jung Pak, and Gaurav Gupta take a look at Apple Inc. (NASDAQ:AAPL)’s share buybacks over the past few weeks, seeing it as a positive development for investors

Apple

Apple’s share buybacks

Apple Inc. (NASDAQ:AAPL) repurchased approximately $14 billion of stock over the past two weeks.

Since its earnings report on January 27, Apple Inc. (NASDAQ:AAPL) has repurchased approximately $14 billion worth of stock. Based on the average stock price of around $505 per share, we estimate that Apple repurchased around 28 million shares during this period, which is about 3% of the float. Moreover, Apple Inc. (NASDAQ:AAPL) has repurchased on average 3-4 million shares per day during the eight trading days, or about 19% of average daily volume.

Based on the share buybacks to date, we estimate that Apple Inc. (NASDAQ:AAPL)’s average diluted share count in the March quarter could decline by 22-23 million shares vs. a 15 million decline in our model. If we assume an average diluted share count of 879 million vs. 886 million in our model, then our March quarter EPS would increase by around $0.09, all else being equal.

The $14 billion of buybacks compares with around $10 billion in the prior two quarters combined, but lower than $16 billion in the June 2013 quarter. In total, Apple has repurchased around $40 billion worth of stock over the past 12 months. We are currently modeling approximately $20 billion of buybacks in FY14 and FY15, which looks conservative since Apple Inc. (NASDAQ:AAPL) will disclose updates to its current $60 billion share repurchase program in the March or April timeframe.

Given the approximately $128 billion of net cash post the buybacks, or $142 per share, we believe that Apple Inc. (NASDAQ:AAPL)’s activity in the market is positive and should be well received by investors.

No changes to our estimates and target price at this time. We remain Outperform on Apple Inc. (NASDAQ:AAPL) shares.