The muppets must buy. Tangentially, one wonders if it was Goldman's advice that a now post-Jobs AAPL followed to do what the banks did post "Stress test"... or if it was JP Morgan's. One can also hope this report from Boy Genius on the NEW iPad occassionally overheating has nothing to do with anything.
A major catalyst fulfilled, many more to come
This morning Apple announced a $2.65 per share quarterly dividend and $10 billion share buyback authorization. Through these programs, the company estimates it will return approximately $45 billion of cash to shareholders over the next three years. While the dividend was essentially in line with expectations, we view the share buyback authorization as an incremental positive. In addition, on the conference call this morning, we believe Apple’s management appeared very willing to consider steady increases in the dividend and share repurchase rate over time. We believe that today’s announcement, coupled with additional positive catalysts that we expect through the year, should continue to lift the stock higher. We reiterate our CL-Buy and raise our 12-month price target to $700 from $660.
We are modestly raising our earnings estimates to account for the lower share count resulting from the share repurchase program. Our EPS estimate of $42.52 in FY2012 is unchanged, but we modestly raise our forecast for FY2013 and FY2014 to $50.57 and $57.90 from $50.29 and $57.14 previously.
We are increasing our target price to reflect the company’s more attractive capital allocation strategy. Our new 12-month price target of $700 is based on a multiple of 16X on our CY2012 EPS estimate of $43.86. This compares with our prior 12-month price target of $660, which was based on a 15X multiple on our prior CY2012 EPS estimate of $43.82.
Key risks include worsening macro conditions, supply chain disruptions, increased platform competition, and potential legal and regulatory restrictions.