Apple Beats Earnings and Announces $110 Billion Stock Buyback

The tech giant plans to buy back $110 billion of its stock

• Apple reported earnings on May 2 and beat EPS and revenue estimates.
• An EPS of $1.53 on $90.75 billion in revenue marks the third double-beat in a row.
• Apple announced a $110 billion stock buyback, the largest in history.

Apple (AAPL) opened the May 3 trading session 7% higher after beating earnings estimates and announcing the biggest stock buyback in history at $110 billion.

Apple set the previous record in 2018 at $100 billion. Apple also set a record in services, and launched the Apple Vision Pro. The tech giant seemed poised to garner a share of the AI world moving forward. And the stock market loved what Apple had to say given the two standard deviation move to the upside the stock realized relative to the expectation of around $6.00.

Luca Maestri, Apple's CFO, announced the stock buyback and dividend increase to $0.25 payable on May 16: "Given our confidence in Apple’s future and the value we see in our stock, our Board has authorized an additional $110 billion for share repurchases. We are also raising our quarterly dividend for the twelfth year in a row."

Tim Cook, Apple's CEO, noted positive sentiment for the rest of the year on the earnings call: "During the quarter, we were thrilled to launch Apple Vision Pro and to show the world the potential that spatial computing unlocks. We’re also looking forward to an exciting product announcement next week and an incredible Worldwide Developers Conference next month. As always, we are focused on providing the very best products and services for our customers, and doing so while living up to the core values that drive us."

The Worldwide Developers Conference (WWDC) will take place the week of June 10, 2024.

What options tell us

Looking at the options market can tell us a lot about the expectation for any stock for certain periods and help us put context around the size of earnings moves. Looking at the June expiration cycle for Apple, we can see that the expected stock price move is +-$8.79. This helps us see just how big this move was to the upside after earnings, considering the June cycle is 49 days away and the move today exceeded the price expectation for the next few months.

Looking further, we can see that the market is still projecting plenty of movement through the year. The December options cycle has an expected move of +-$23.78 based on current implied volatility, which is 12.5% of the current stock price.

Bullish on Apple for 2024

Apple is betting on itself with the stock buyback, which certainly helps calm bullish traders and investors. The tech giant has plenty of plans to innovate and continue to be one of the biggest companies in the world, and I'm sure many people are excited for the WWDC event in June.

If you're bullish on Apple, you probably believe it will compete mightily with other tech companies vying for a share of the AI world, and a calm economic environment may help Apple regain the all-time high of $199.62 realized in December 2023.

Bearish on Apple for 2024

Apple bears may believe that even though this earnings call was positive. Competitors might produce a better product and/or service in the AI space and Apple will falter.

China competition remains strong with the iPhone, which could result in bearish moves going forward if Apple cannot overcome the hurdles in front of it.

Tune in for more earnings strategies on Options Trading Concepts Live, every market day at 11 a.m. CDT.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb

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