Back to top

Analyst Blog

Apple (AAPL - Analyst Report) management can breathe a sigh of relief after activist investor Carl Icahn dropped his aggressive share buyback proposal for the time being. The proposal that drew a flurry of attention over the last six months received a jolt over the weekend, when Institutional Shareholder Services Inc. (ISS) backed Apple’s strategy of holding cash.

Apple most recently disclosed that it has bought back shares worth $14.0 billion over the past two weeks, taking advantage of a declining share price. The company has spent more than $40.0 billion for share repurchase of its total $60.0 billion (to be completed by 2015) authorization in the past 12 months.

In his open letter to Apple shareholders following ISS’ recommendation, Carl Icahn also admitted that this aggressive buyback is one of the reasons behind his retreat. We believe he will now focus more on March-April when Apple is set to reconsider its buyback target.

Apple’s management has argued that the strong cash balance ($158.8 billion at the end of the first quarter) is necessary to maintain flexibility. Apple CEO Tim Cook noted that the cash will also facilitate the company’s long-term strategies that may include large acquisitions.

As most of Apple’s cash is parked in overseas markets, a large buyback may force the company to repatriate some of it by paying a hefty tax. The company can also borrow for the purpose, which may bring down its credit rating as per Moody’s’ (MCO - Analyst Report) investor service.

In such a scenario, support from an influential body such as ISS provided some room to Apple’s management against Carl Icahn. Additionally, consecutive share price rise signaled investors’ confidence in management’s current strategy despite a muted second-quarter outlook.

Apple continues to lose market share against Google’s Android operating system and handset maker, Samsung. Tim Cook also admitted that iPhone sales in North America were stalled in the first quarter, which is a major concern.  

Although the distribution partnership with China Mobile (CHL - Snapshot Report) and partnerships with 50 new carriers are positive for overall sales, sluggish North American business will negatively impact gross margins. Moreover, lack of a new innovative product continues to remain an overhang on the stock.

Currently, Apple has a Zacks Rank #3 (Hold).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
STRATTEC SE… STRT 80.24 +3.00%
PATTERSON-U… PTEN 34.54 +2.98%