Apple (AAPL): Keep Your Eye On The Buybacks - Bernstein

Bernstein analyst,Toni Sacconaghi, analyzed Tim Cook's track record with public appearances and Apple (NASDAQ: AAPL) stock price reaction. Interestingly, and perhaps not surprisingly, he found that during Tim Cook's tenure as CEO, it has made more sense to follow the company's buyback trends than the CEO's media appearances (and accompanying assurances).

Cook's appearances appear to follow a period of investor concern or controversy. Bernstein's analysis reveals that on average AAPL's stock has underperformed by 440 bps in the two weeks preceding his television appearances, with the stock underperforming 5 times, and performing inline on the other two occasions.

Cook's television appears have generally attempted to soothe prevailing investor concerns, and Apple's stock has initially typically reacted neutrally or somewhat positively to the public appearances historically, as it did last week. However, generally, the public appearance / associated commentary has not been a good leading indicator for the stock over longer periods. In the day following a public appearance, AAPL has outperformed the S&P by an average of ~90 basis points. Moreover, AAPL outperformed all but once on the day after. That said, this impact has typically been short-lived – more than 3 months following the interview, Apple typically underperformed the S&P.

Repurchases have been a better indicator. When repurchases were under $14B in a given quarter, AAPL stock underperformed 11 out of 15 times since Q1'12 or 6 out of 9 times since Apple started repurchasing shares in Q3 14, by an average of 400 bps in the following 4 month period and 600 bps in the following 7 month period.

Monitor buybacks going forward, given their history as an effective leading indicator. We note that AAPL's buyback's in its recent FY Q2 (March) were at average to below average levels ($6.7B) despite the fact that the stock had underperformed materially over the last several quarters.

The firm maintained an Outperform rating and price target of $135 on AAPL.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $92.72 yesterday.

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