updated 08:00 pm EDT, Fri August 16, 2013
Investors like idea of bigger buyback, possibly imminent iPhone release
Apple's stock closed above $500 on Friday, continuing a recent rally that began after investor Carl Icahn revealed both an interest in having Apple buy back more of its own stock as well as his holding of a "very large" position in the company, which he said was "undervalued." His comments, alongside further legal wins, upcoming product releases and other general good news for the company, has seen the stock rise from $393.78 per share in late June to close at $502.33 today. It is continuing its gains in after-hours trading.
After two days of small losses and gains, AAPL gained $4.42 (not quite a full percentage point) and has risen another $1.14 after hours. The stock has not seen $500 a share since late January. The alleged date of the rollout of the latest iPhone -- said to be held on September 10 -- may also be playing a role in the rally.
While the next iPhone model is not expected to be a major redesign, part leaks, rumors and tradition with "S" releases suggest that the new model will sport many improvements small and large over the current iPhone 5, which will be augmented with the release of iOS 7 (likely simultaneously or around the same time frame). Wall Street is also excited by the sales and expansion possibilities of a lower-cost second iPhone model, speculated to be called the "iPhone 5C" and aimed at developing and prepaid markets.
Icahn's meeting with CEO Tim Cook -- and revelation that his company holds possibly as much as a billion dollars in AAPL -- sent the stock rising as Icahn urged Cook to be even more aggressive in buying back and retiring outstanding stock. Apple has already bought back nearly $18 billion in stock on a more aggressive schedule than was expected ($16 billion of it was purchased in just the last three months), taking advantage of the lower prices. The company plans to buy back an additional $42 billion in stock over the next three years -- with investors like Icahn hoping the company will take on some incremental debt in order to push the program up to as much as $120 billion in stock buyback.
Whether Cook will take Icahn's advice remains to be seen, but Apple traditionally has preferred buybacks as a way to return money to investors compared to dividends, which the company is also paying out after many years of resistance. Its most recent dividend dispersal returned $2.3 billion to investors.