updated 02:33 am EDT, Tue April 29, 2014
Shares up $70 since announcements of expanded buybacks, more
Apple's stock closed on Monday at a year-to-date high-water mark, closing in on $600 as the repeated message of last week's earnings call -- Tim Cook's "we believe the stock to be undervalued" mantra -- appeared to sink in on the back of better-than-expected iPhone sales, an expansion of the stock buyback program and an announced 7-to-1 stock split taking place next month. The stock has jumped almost exactly $70 since last Thursday.
Illustrating again how much analysts care about iPhone sales (almost to the exclusion of anything else), Apple's ability to grow its iPhone market both in and beyond the United States appears to have been a lead factor in the sudden upward trend, with numerous analysts duly raising their targets. The stock split, though it will not change the value of investors' holdings, was seen as a bold move by a company that is confident about its future. Pundits, who have been on the attack against Apple over its lack of "revolutionary" products over the last couple of years, appear to be looking at the company's current business and future prospects with fresh eyes.
The $594.09 closing on Monday is AAPL's best performance in over a year, overlooking softening iPad sales, flat retail growth and a rapidly-declining iPod business (which had been expected, but continues to plummet at a faster rate than expected). Apple's record March-quarter earnings and profit -- $43.2 billion and $10.2 billion, respectively -- appears to have finally convinced Wall Street more than three years after Tim Cook effectively (and two-and-a-half years since he literally) took the reins at Apple that he can continue to make the business a stunning performer even without regular releases of "breakthrough" products.
That said, Cook has promised a goody bag of new products in the pipeline for the second half of the year, including more than one in "new categories." Apple's growing iPhone share in developing markets, the Mac's trend-reversing slow but steady growth, and the "known" factors that will excite buyers ahead of the 2014 holiday season -- a new "iPhone 6," refreshed iPads, releases of OS X 10.10 and iOS 8, all expected in the fall -- along with the "known unknowns" of a rumored revamped Apple TV, a possible Apple "smartwatch" type device, possibly refreshed MacBook Pros and overdue updates to the Mac mini and Apple Cinema Display promise to make the second half of 2014 a busy season.
While still more than $100 off its all-time high of $700 from a year and a half ago, investors are likely also responding positively to the company's announcement that it will increase its dividend again along with the upcoming split, and plans to offer annual increases for the foreseeable future. It also promised annual reviews on how it would disperse its enormous cash pile, which went down slightly from $159 billion to $150 billion, owing to the increasing cost of satisfying shareholders and Apple's more aggressive posture on acquiring small technology companies.
The company is hoping to attract smaller investors through its 7:1 split, which would lower the cost of a single share from its current $594 to a more affordable $80-90. While the future is impossible to predict, long-term shareholders of AAPL have done remarkably well -- a hundred shares of Apple stock bought in early 1987 (before the first split) for around $10 (cost: $1,000) and sold today (before the upcoming split) would now be 800 shares at nearly $600 each (approximately $480,000).