• Bernstein analyst Toni Sacconaghi notes that while Apple Inc's (NASDAQ: AAPL) EPS has been strong over the last eight years, the company has not benefited from operating leverage.

  • The analyst has a Market Perform rating and a price target of $132, implying a 12.6% downside.

  • Share buybacks and a lower tax rate have been critical drivers of EPS growth, adding 400 to 600 bps and 200 bps per year, respectively.

  • "Incredulously, strong buybacks could continue for another 15 years," Sacconaghi says if Apple decided it was comfortable taking on leverage.

  • His analysis suggests that Apple is likely to be able to continue repurchasing about 3%-4% of its shares per year until the end of 2026 while growing its dividend per share by 10% annually without taking on net debt on its balance sheet. At which point, Apple will have likely repurchased about 15% of its current shares outstanding.

  • Apple's ongoing buyback program provides a relatively clear path to high single-digit EPS growth or better for the next five years, assuming its hardware revenues do not decline and its service segment grows at historical mid-teens.

  • Price Action: AAPL shares traded higher by 2.26% at $154.42 on the last check Wednesday.

Latest Ratings for AAPL

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Oct 2021




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