) sparked a mini-controversy with its Q2 2024 earnings report. The phone company announced the largest share buyback program in the history of the US stock market, worth $110 billion. This surpassed Apple’s own record of $100 billion buyback program announced in 2018.Although Apple branched out beyond the smartphone market, it still comprises the bulk of the revenue. For Q2 2024, Apple tracked $90.8 billion net sales, a 4% decline year-over-year.
It turns out, this financial novelty has its root in inflation, mirroring today’s macroeconomic landscape.Up until the early 1980s, share repurchase programs were illegal. After all, by repurchasing its own shares on the open market, the company’s insiders would have an advantage that can be construed as market manipulation.
This trend is the opposite of 2023, when there was a 13% decline in corporate buybacks. However, this was the year of recessionary concerns wherein recession was seen as the ultimate remedy for inflation at the cost of unemployment.By artificially tampering with shares’ supply, much like central banks do with fiat currencies, companies create a false sense of stock demand. In the irrational waters of the stock market, this has great potential for stock overvaluation.
“…my honest opinion is that there is a culture of innovation in Apple and that culture of innovation combined with these incredible, loyal customers, happy customers, this ecosystem, this virtuous ecosystem, is something that is probably underappreciated.”If the latest antitrust lawsuit were to break those ecosystem walls, such as imposing “extraordinary costs on developers, businesses, and consumers”, Apple’s value proposition would likely lag behind buyback efforts.
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