Apple, before this year a standout long-term performer in equity markets, faces a valuation increasingly disconnected from its core fundamentals. Instead of innovation or significant growth driving its stock, the company has relied heavily on financial engineering, particularly through massive share buybacks, to prop up its performance.
Chase Alexander for GuruFocus:
While Tim Cook’s capital allocation strategy has been highly effective, the benefit of buybacks diminishes when shares are richly priced, the fundamental issue with buybacks in this case is:
1. They rely on valuations being low enough to act as accretive to earnings (they no longer are at roughly 200 a share)
2. They mask underlying issues fundamental to the company by propping up the order book without real underlying demand. At current valuations, 30+ PE and effectively zero growth, not only is the valuation high, which limits the ability of the company to significantly reduce float through buybacks, there is effectively zero impact on EPS. A 30 PE is a significant premium to the greater market, while there is value to stable cash flows and effective capex, this on its own is really not enough, a 30 PE with zero growth is obscene.
This reference to zero growth is not an exaggeration, the company has not increased revenues meaningfully since 2022 (EPS is flat as well) and the company does not have the significant investment pipelines other mega-caps display. Service growth has also stagnated with significant focus on regulatory headwinds such as within the EU regarding App store policies and anti competitive processes.
The company seemingly has done nothing to expand within the artificial intelligence boom and as an extensive user of the Apple ecosystem, the company seems to have been left in the dust and has not offered any compelling reason to utilize any of its “tools” related in any way to industry megatrends.
MacDailyNews Take: For now, Teflon Tim’s protective coating is intact, but, at some point — yes, it’ll have to get even worse than shedding a quarter of share value in less than six months — Apple shareholders will en masse see behind the curtain and finally force what should’ve already happened years ago.
See also:
• Time to Think Different: Tim Cook’s leadership has run its course at Apple – June 20, 2025
• Tim Cook is not the best person to be CEO of Apple – April 2, 2019
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[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
The post Apple’s massive buybacks can’t hide flat growth appeared first on MacDailyNews.
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