Buybacks: A Floor Under the Price of Apple Inc Stock

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Buybacks: A Floor Under the Price of Apple Inc Stock
<a href="https://pixabay.com/users/Pexels/">Pexels</a> / Pixabay

If you own Apple Inc. (NASDAQ:AAPL) stock, or you’ve been following it, then you probably already know that the company has been buying back large quantities of its own shares for years. Indeed, the number of shares of Apple Inc. stock outstanding has been declining steadily since 2013.

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You very likely understand that when fewer and fewer shares of a stock are available to the public, this tends to push up the price per share. After all, when the supply of any good or service declines – and if all other factors remain the same   -- the price of that good or service will rise.

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Decline In Apple Inc Stocks Held By The Public

The accompanying table shows the steady decline in Apple shares held by the public since 2013, when there were 6.57 billion shares outstanding. As of May 5, 2020, that total had fallen to just 4.33 billion – a decline of 37.1%.

Date Billions of Shares Outstanding
01/11/2013 6.57
01/10/2014 6.24
01/09/2015 5.82
01/08/2016 5.54
01/20/2017 5.25
01/19/2018 5.07
01/18/2019 4.72
05/04/2020 4.33

Now we get to the interesting part of the saga. Apple has announced plans to continue buying its outstanding shares, even though its price has risen substantially during the last couple of months.

The Effect Of Stock Purchases On The Stock Price

While there is no guaranty that the company will continue buying up its outstanding shares in future years, investors should definitely take into account the effect that future stock purchases will have on the price of Apple Inc. stock.

Its price has been hit by a quadruple whammy in just the last year or so. First, we have the Trump tariffs imposed on manufactured goods – think iPhone – imported from China. Then, in the first quarter of this year, the spreading coronavirus decimated Apple’s sales in China. In short order, when that nation’s entire economy was shut down, again Apple was hit disproportionately, and the company’s sales were affected all over the globe. And finally, as the virus continues to spread, there is no telling how badly the company’s sales outlook will be for the rest of the year.

So one may ask why the stock is currently selling just thirty dollars below its all-time high. Well, those continuing buy-backs certainly didn’t hurt.

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