Category Archives: apple

How Much Will Apple Increase Its Dividend, Stock Buybacks?

With iPhone sales expected to fall on a year-over-year basis for the first time in the March quarter, Apple ( AAPL ) investors are shifting their focus toward the company’s annual adjustments to its capital return program. Apple is expected to increase its quarterly cash dividend and raise its stock buyback plan when it announces fiscal-second-quarter earnings on April 25. The question is: How much will Apple boost its capital return outlay? Last year, Apple increased its quarterly dividend by 11% to 52 cents a share and raised its share repurchase authorization to $140 billion from the $90 billion level announced in 2014. In total, Apple’s directors last year authorized an increase of more than 50% to the company’s program to return capital to shareholders. Under that plan, Apple expected to use a cumulative total of $200 billion in cash by the end of March 2017. Credit Suisse analyst Kulbinder Garcha on Friday said Apple could comfortably raise its capital return by about $10 billion per year over the next two to three years. “This would result in a capital return of about $53 billion per year, or roughly 8.5% of Apple’s market cap,” Garcha said in a report. Garcha reiterated his outperform rating on Apple stock with a price target of 150. Apple stock was flat, near 112, in midday trading on the stock market today . RBC Capital Markets analyst Amit Daryanani said March 27 that Apple could raise its dividend by 10% to 15% to get its yield above 2%. Apple also could boost its stock buyback program to $40 billion to $50 billion a year, compared with $35 billion last year, he said in a report. Earlier last month, Piper Jaffray analyst Gene Munster predicted Apple would raise its dividend by 5% to 10%. Apple Car Strategy Is Likely A Software Initiative Meanwhile, Mizuho Securities analyst Abhey Lamba on Friday reiterated his buy rating on Apple with a price target of 120. In a report, Lamba said Apple could make a bigger push into the automotive market with software-led developments in advanced driver assistance systems (ADAS). “We think Apple is likely to participate in the ADAS market in some way, even though it has yet to highlight its plans,” Lamba said. “Apple has clearly communicated its intentions of becoming a more pervasive part of the consumer lifestyle experience over time. “As it pertains to the auto market, CEO Tim Cook believes the industry could be poised for disruption with ‘electrification and autonomous driving’ in the near term. As an anecdote, we find evidence to support these ambitions in the company’s recent, aggressive hiring plans across engineering and operations.” While some analysts believe Apple is working on its own car, Lamba says it’s more likely the company will provide technology to current automakers. It already offers its CarPlay software to several major automakers. On Thursday, Motor Trend magazine provided its best guess at what an Apple Car might look like . Its artist conceptions show an almost egg-shaped vehicle with a glass ceiling and double-wide gull wing doors. RELATED: Apple iPhone Sales Could Fall For 3 Straight Quarters, Analyst Says Apple Should Be Valued Like Internet, Not Hardware, Company .

Healthcare Stocks Can Heal From Pricing Scares

By James T. Tierney, Jr. Click to enlarge Fears of price controls for drugs and the crisis at Valeant Pharmaceuticals have infected the US healthcare sector. But we believe that the sector isn’t fatally ill and that investors can still find companies that offer solid growth potential. During the first quarter, healthcare was the worst-performing sector in the S&P 500 Index, falling by 5.5%, compared to the market’s 1.3% gain. At the same time, the iShares NASDAQ Biotechnology Index dropped by more than 20%. Price Controls: Fact and Fiction So what happened? Let’s start with the comical explanations. The presidential election cycle continues to be a source of peculiar promises. Donald Trump surprised investors on February 7 by saying that he would negotiate $300 billion of price concessions for the US government from drug companies. But the math doesn’t quite add up; total industry revenues from federal spending were only $143 billion in 2014. That didn’t stop the headlines, which spooked investors. Some concerns were real. The Centers for Medicare & Medicaid Services announced a proposed rule that would change how they pay for drugs that are not self-administered. There will be a demonstration project to assess the impact of the proposed changes starting later this year, and it will probably run for a couple of years. The initial plan involves reimbursement changes for the providers (hospitals and physicians), rather than changes for the drug companies themselves. These proposals have raised concerns that drug-price controls may be introduced at some point. In our view, the repeated price-control scares are a red herring. Investors need to focus on companies with products that can deliver meaningful benefits for patients. Those that can’t meet these conditions will have a challenged future—price controls or not. Growth Stocks Lagged Market rotation was also a driver of underperformance for the healthcare sector in the first quarter. Generally speaking, investors sold last year’s winners such as Internet stocks and biotech companies, and bought the underperformers, including utilities and energy. In addition, value-related industries in the US market performed better than growth-oriented sectors like healthcare. But style winds can be deceiving. While we understand why more economically exposed cyclical sectors bounced back strongly as recession fears faded, in reality, the world is still in a slow-growth mode. So don’t expect all boats to rise—and growth will likely still be scarce. In these conditions, a sector like healthcare should be well positioned over time, given global demographic trends, as people are living longer and tend to need more pharmaceutical products as they get older. In addition, untapped treatment areas such as cancer and Alzheimer’s disease hold long-term promise for companies that can crack the code and discover effective treatments. Valeant Crisis Shakes Industry Against this messy backdrop, the troubles at Valeant Pharmaceuticals (NYSE: VRX ) have shaken the industry. Valeant’s controversial business model was driven by acquisitions, cost cuts and aggressive price increases. This year, the company’s shares have tumbled more than 65% amid a series of scandals that put it in the eye of the drug-pricing storm, with company executives being called upon to testify before a Senate and House of Representatives committee. Valeant’s high debt levels have raised fears of default, after the company missed its filing deadline for its 10-K report. The most surprising thing about Valeant’s predicament is how the fallout has spread over the rest of the healthcare industry. The increased focus on drug pricing—and negative sentiment around acquisitions—has been more profound than expected. We believe that this fallout will eventually diminish, and quality companies will prosper again, but the rebound will take time. Prescription for Investing Success So what should investors do? Don’t give up on healthcare stocks. It’s very easy to get distracted by the intense noise across the industry. But healthcare stocks offer equity investors defensive positioning and solid growth potential, even in a tough global economy. Companies with solid fundamentals that aren’t really vulnerable to recent developments can be found. Equity investors should focus on identifying companies with solid earnings growth potential and drugs that offer a differentiated and meaningful medical benefit. It’s also important to make sure that drug-pricing structures are in line with the benefit delivered by the product, and that the company’s business model is based on volume growth rather than aggressive price increases. We believe that these guidelines are a prescription for success in the healthcare sector—where many stocks are currently on sale. The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.