Muller is enthusiastic about Apple’s stock buyback program. “AAPL remains in a league of its own when it comes to share repurchases,” he wrote in a commentary.
“While AAPL's significant capital return program is well known by the market, we do not believe the market is giving enough credit for the financial impact. Or if it is, then organic growth is being understated.”
Apple shares were up 0.6% to $354.10 on Wednesday morning and are up 20.6% year to date. Shares have increased tenfold in the last ten years.
In Muller’s base case, Apple grows its earnings per share at a 3.5% compound annualized growth rate over the next five years. That assumes zero earnings growth beyond fiscal 2020 and continued repurchases of about $70 billion a year.
“What this implies to us, is that the potential uplift from the 5G upgrade cycle is being discounted by the market, in addition to recent robust wearables and services growth as well as any potential future product innovations,” Muller said.
To reach its target of cash neutral, Muller said, “if AAPL maintains its recent pace of $70 billion of share repurchases and is able to grow its top-line by 3-4%, AAPL can continue through the next decade before reaching its target.”
On Tuesday, Citigroup analysts raised their share-price target for Apple to $400 from $310. And last month, J.P. Morgan analysts lifted their target to $350 from $335.