Apple Inc. (NASDAQ:AAPL) is becoming more and more attractive to own as the company continues to increase the total value of its capital return program. A new report from the RBC Capital Markets, which concentrates on the importance of that program for Apple shareholders, raised the price target on the company and rated the company at Outperform.
The upgrade from RBC is the second from the analysts in the last fortnight. The impressive results from the Apple Inc. (NASDAQ:AAPL) second quarter earnings report coupled with the strong pressure from the company’s capital return program and expectations of new products have driven its value up faster than expected. A new price target, set at $645, may be challenged after the company splits its stock and announces its plans for 2014 in June.
Apple continues to buy price support
According to Amit Daryanani, who authored the RBC not on Apple Inc. (NASDAQ:AAPL), the iPhone maker is set to Outperform in the next twelve months or so. Most of the added performance represented by the $20 increase in price target, comes from the company’s share repurchase program. Mr. Daryanani expects investors to push the value of the company up as it lowers the number of shares outstanding.
RBC expects Apple Inc. (NASDAQ:AAPL) to repurchase something in the region of $44 billion in shares through December of 2015. Repurchasing shares will have the necessary effect of increasing the firm’s earnings per share everything else remaining equal. That led to an increase in the analysts’ estimates of the company’s earnings for the full year 2015.
Apple Inc. (NASDAQ:AAPL) is doing a good job of supporting the value of its stock by returning some of its burgeoning cash pile to investors through share repurchases, dividend hikes and it coming stock split. Those moves make the company’s shares more attractive to own, but they are, at the end of the day, little more than ways of paying shareholders to hang on. What really matters is what the company has coming next.
Apple capital return growth can’t last forever
The Apple Inc. (NASDAQ:AAPL) dividend is attractive to any dividend stock buyer, and the company’s regular increase in its value have made more and more investors value the company for its pay-out rather than its capital gains. This has the effect of keeping the stock price high, but it’s untenable unless the company can continue to make its business grow at a high rate.
Apple Inc. (NASDAQ:AAPL) has had problems doing just that in recent quarters, and the company’s ample revenue growth stopped supporting its share price growth a couple of years ago. If Apple wants to really impress investors it’s going to have to try to reach something like those rates of growth again, and that’s not al that easy of a task.
Daryanani is expecting Apple Inc. (NASDAQ:AAPL) to release an iPhone 6 in September, an iPad release close to the end of the year and the June WWDC to drive the share price higher. The analyst stayed away from more speculative thoughts of an iWatch, or an Apple Inc. (NASDAQ:AAPL) television set.