Apple Inc. (AAPL)’s share repurchase program is scheduled to restart on Friday. It is a good time for the company to buy back shares as they tumbled to their lowest price year to date on Thursday.
Apple stock in a downturn
On Tuesday, the Cupertino-based company released its earnings for the second quarter, after which its stock declined from just over $104 to open at $96 on Wednesday. The shares remained flat until Thursday afternoon when activist investor Carl Icahn announced on CNBC that he had sold all the Apple shares he held.
Icahn’s announcement led to a further decline in the shares to nearly $94, a price too close to the lowest seen in early February 2016, though in after-hours trading, they improved slightly. Apple shares have year-to-date highs of above $110 and are set up to open at a big discount today right when the company has the permission to resume buyback activity.
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Goldman Sachs portfolio strategist Amanda Sneider issued advice for investors a year ago to take advantage of the buyback period following the earnings reports of companies with share repurchase plans. Sneider noted that stock prices typically remain low until the company gets permission to resume buybacks.
Are buybacks a wise decision?
Apple spent $7 billion on share repurchases at an average share price of $97.54 in its fiscal Q2, again taking advantage of dips in its share price. In the previous five quarters, the company spent $33 billion on share buybacks, all of which were made at average share prices ranging from $109 to $128.
Currently, they all look like poor investment decisions considering the company’s current share price and 20/20 hindsight, the report says. Apple has announced plans to spend $35 billion on additional buybacks, reflecting that it still has confidence that its shares will recover from the current doldrums.
Apple’s shares are currently trading below their price level in the summer of 2014 and also below their highest point in 2012. This suggests that the buybacks are not helping, and therefore, some have even questioned if buying back shares is a wise decision or not.
On Thursday, Apple shares closed down 3.08% at $94.81. Year to date, the stock is down by almost 12%, while in the last year, it is down by over 27%. The stock has a 52-week high of $132.97 and a 52-week low of $92.