Citi Analysts Believe Apple Will Add $100 Billion To Its Capital Return Program In Upcoming Earnings Call; Amount Will Decrease Stock By 9.5% Over Two Years

Ramish Zafar

Apple's earnings call is due next month. After having a full quarter of letting iPhone sales sink in, it's finally time to see how things appear on the balance sheet. More than half of company's revenue depends on the iPhone. Add this to current estimates of declining sales and manufacturing cutbacks and one begins to wonder how long will it rely on its recent Average Sales Price hike to keep the numbers up. Today, we've got some interesting and logical speculation from analysts Jim Suva and Asiya Merchant of Citigroup. Take a look below for more details.

Analysts Believe Apple Will Add $100 Billion To Its Capital Return Program After Mergers & Acquisitions, iPhone Sales Not On The Cards To Keep Stock Price Stable

At its earnings call last quarter, Apple reported $88.3 Billion in revenue, with a 21% year-on-year growth. However, keeping this consistent for the second quarter will be hard; especially with production cutbacks and decreasing iPhone sales. Of course, this is not a cause for serious concern, as the company has faced a reduction in iPhone sales previously as well.

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Still, an upward growth trajectory places undue burdens on management to keep up with shareholder concerns. When considering share price, directors have a handful of options to ensure it either rises or stays stable. In Apple's case, market sentiment for potential acquisitions from the cash pile it brought back to the US after tax exemptions raised expectations.

After it became clear that the company will not head down this road, analysts at Citigroup believe that Apple will add on to its time-tested strategy at its upcoming earnings call.

Analysts Jim Suva and Asiya Merchant at Citigroup believe that Apple will add $100 Billion to its capital return program this earnings call. Cupertino created the program several years back, but it's about to run its course. Company CFO Luca Maestri confirmed updated discussions next quarter related to the program at Apple's last earnings call. He added that Apple will review the program after taking a look at its second-quarter results.

"Apple surprised many during its last earnings call by stating that it plans to deploy its net cash position toward capital returns and acquisitions. We currently model a $100 bln incremental total capital returns authorization to ~$400 bln," state Suva and Merchant in a recent note to investors. The analysts believe that 50% of the buyback program will go towards share repurchases over the next two years; reducing Apple's stock by an additional 9.5%.

Presently, it's a tough environment for Tim Cook and his team to operate in. Apple's CEO needs to diversify the company's revenue streams urgently. At the same time, he also needs to make sure Apple isn't caught at the center of Trump administration's attempts to reduce the Chinese trade deficit. How well he navigates, will define Cupertino for years to come. Thoughts? Let us know what you think in the comments section below and stay tuned. We'll keep you updated on the latest.

News Source: Business Insider

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