More: Apple (AAPL): Keep Your Eye On The Buybacks - Bernstein
May 9, 2016 10:46 AM EDT
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.
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