Apple Buybacks Have Been A 'Powerful' leading Indicator

On CNBC's Mad Money last week, when Jim Cramer spoke to Apple Inc. AAPL CEO Tim Cook, several investors asked whether Cook’s media appearances presaged stock performance.

Bernstein’s Toni Sacconaghi said that, having analyzed the correlation between CEO Tim Cook's public appearances and Apple's stock price reaction, it seemed more prudent to “follow the company's buyback trends than the CEO's media appearances (and accompanying assurances).” The analyst maintained an Outperform rating for the company, with a price target of $135.

Take Cue From Apple Investing In Itself

“Do what they do, not what they say,” analyst Toni Sacconaghi recommended investors. He said that share buybacks were a superior indicator of Apple's “near-term business health and forward stock price.”

Sacconaghi pointed out that since 2012, whenever Apple bought back shares worth $14B or more during a quarter, the stock had meaningfully outperformed over the next couple of quarters. He added that in most other periods, Apple’s shares had underperformed.

Apple’s share repurchases in the most recent quarter [FYQ2] were at average-to-below-average levels, around $6.7B, despite the stock’s significant underperformance over the last several quarters. The analyst added, “We encourage investors to monitor buybacks going forward, given their history as an effective leading indicator.”