Pinpointing the moment when Apple will officially become the first trillion-dollar public company is trickier than it may seem, largely because of the company’s mammoth stock buyback programme.
On Wednesday, shares in Apple climbed more than 4 per cent after the technology giant reported stronger than expected revenue growth on the back of the success of the top-of-the-range versions of its flagship iPhone. Overall revenues climbed 17 per cent year-on-year to $53.3bn in the third quarter, as profits jumped 32 per cent to $11.5bn.
The rising share price means that Apple is moving towards a market capitalization of $1tn, but the calculations are not clear cut given uncertainty about the number of shares in circulation owing to the extent of Apple’s buyback programme.
The buyback is one of the big reasons investors have been so enthusiastic about the tech group this year and it provides a prop to the company’s market value since Apple can go in and buy shares whenever they are weak.
But the programme also obscures exactly how many Apple shares are still outstanding.
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As of the end of June, the iPhone maker had 4.843bn shares in issue, according to its latest earnings report. That means that Apple should have a total market capitalization of $1tn when its shares hit $206.49.
But buybacks reduce the share count, which makes the $1tn mark a moving target.
Apple has already retired almost a quarter of its shares since it started repurchasing its stock in the first quarter of 2013, according to Howard Silverblatt, analyst at S&P Dow Jones Indices.
The count will almost certainly fall further as the company continues to funnel money back to shareholders. For example, Apple’s share count was 5.074bn as of January 19, and at the current rate of buybacks the count will drop to 4.756bn by the time company next reports the number alongside quarterly earnings. In that case, the shares would have to reach $210.25 for Apple to smash past the trillion-dollar mark.
“The more they buy, the more the shares have to go up” for Apple’s market cap to hit $1tn, Mr Silverblatt said.
Data providers such as Thomson Reuters and indices such as the S&P 500 calculate Apple’s market cap in real time based on the share price and the last public share count — at the moment the April 20 count. Other companies in the race to a trillion also have counts that may be out of date, due to the use of share options, but Apple’s buyback plan makes its fluctuations the most significant.
Apple estimates that by the end of next month it will have returned about $210bn to shareholders in buybacks and dividends since 2013 — more than the entire market value of corporate giants AT&T, Coca-Cola or Disney.
Just in the first quarter of 2018, Apple bought back $22.8bn of its own stock and the company now accounts for six of the top 10 biggest quarterly buybacks in the US stock market’s history.
Apple is aiming to get its net cash position down to zero over time, from $145bn at the end of March, so the buyback programme is set to continue — and along with it, the decline in Apple’s share count and the imprecision about its market cap.
