Apple Takes $14 Billion Bite of Its Own Stock

TimCook2Two weeks after the company’s first-quarter financials results disappointed investors, Apple has repurchased $14 billion of its stock. This should appease those who lamented its poor guidance.

Late Thursday, The Wall Street Journal reported that CEO Tim Cook said that the company was “surprised” when its stock dropped 8 percent the day after its earnings report.

He told the Journal that he wanted to be “aggressive” and “opportunistic.” The company has faced pressure from activist investor Carl Icahn to boost its share buybacks.

Cook also told the Journal that Apple has repurchased more than $40 billion of its shares in the last 12 months.

Last April, investors cheered when the company announced a significant expansion to its capital return plan. This included buying back $60 billion of its stock, which will extend through 2015.

According to the Wall Street Journal, Cook said that the most recent repurchases were still part of this previously revealed stock buyback plan. He also said that $12 billion of the recent buys were purchased through an “accelerated” buyback program, while the remaining $2 billion were bought on the “open market.”

Clearly Cook believes Apple’s stock is undervalued at the moment. Reading into this; it tells me that Apple has confident in where it belies the share price will/should be based upon the plans it has underway.

From an investment perspective, this should be taken as a signal that (perhaps) the new products categories that is being rumored might have the same impact as the original iPhone, iPad and iPod. These were breakthrough devices that helped Apple grow both revenue and earnings impressively during a 5-year span.

Of note, the company has recently recommended that shareholder vote against Carl Icahn’s proposal to expand its share repurchase program by an additional $50 billion. The activist investor may now have a few more reasons to reduce the pressure.

On Friday, shares of Apple closed at $519.68 – gaining 1.4% on more than 13 million shares traded.

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