The Tax Cuts and Jobs Act has given Apple Inc. (NASDAQ:AAPL) the opportunity to give US$100bln back to its shareholders, according to a note by Citi Research analysts shared by CNBC.
The cash benefit will be used to buy back more of its own shares and increase the dividend programme.
In a Wednesday note, analyst Jim Suva wrote: “Looking ahead, we expect investor focus to be on the impact from Apple’s capital returns strategy, which we estimate could be a $100 billion increase, the 2H18 lineup, and continued strength in Apple’s Services segment.”
Citi on $AAPL: "we expect investor focus to be on the impact from Apple’s capital returns strategy"
Goldman on Apple: "would not recommend that investors focus on expected increased buybacks as the main reason to own the stock.
(h/t @marfgilbert) @CNBC
— Carl Quintanilla (@carlquintanilla) April 5, 2018
Citi also confirmed its Buy rating for Apple shares and the analyst reiterated a US$200 price target.
Apple shares were trading at US$168.92 per share on Friday afternoon, down 2.25%.
Goldman analysts stress fundamentals
Goldman Sachs analysts on Tuesday maintained their Neutral rating, even though they noted that Apple has done well with previous buybacks.
They calculated that the company has reached investment returns of US$66bln for its buyback programs. Apple has returned US$237bln to shareholders since 2013, with three-fourths of that money coming from buybacks.
“Our conclusion is that buybacks have become a less dependable way to predict future stock performance in recent years as their popularity has grown,” the analysts said.
They recommended that investors shift their focus from the buyback program to Apple’s fundamentals when deciding whether to own the stock. The analysts called Apple’s fundamental outlook, and the iPhone demand expectations for March and June, “weak.”
The 12-month price target remains at US$159.
Apple is set to report its second-quarter earnings May 1.
-- This update adds Goldman Sachs research and rating.