Apple's stock buyback not a lasting tonic, says analyst

JP Morgan's Mark Moskowitz would rather see Apple pour more of its cash into new products and services.

James Martin/CNET

Apple may have pleased investors with its recent stock buyback, but analyst Mark Moskowitz doesn't see the news as a big cause for celebration.

Speaking with The Wall Street Journal this week, Apple CEO Tim Cook revealed that the company had taken advantage of the recent price drop to repurchase $14 billion of its own shares . Activist investor Carl Icahn and others have been pressing Apple to move more aggressively to buy back stock. However, the buyback doesn't do much to address other problems facing the company, according to JP Morgan's Moskowitz

The analyst said he would rather see Apple spend more of that money to invest in new technologies and services, especially given the increasingly saturated smartphone market and the growing threat to the company from the competition.

"We do not think this buyback activity overcomes the slowdown in the all-important iPhone business," Moskowitz said in an investors note released Friday. "The last two iPhone launches have not resulted in multi-quarter sales growth spurts as previously seen. We think this lack of follow-through indicates end users are slowing their refresh rates, and recent technology advancements have not been enough to change that."

Moskowitz also said he thinks Apple should spread its wealth to bump up the dividend and invest in more acquisitions. In the interview with the Journal, Cook said Apple is open to buying the right company as long as such a deal would be in its best long-term interests.

The future isn't all gloomy, though, according to Moskowitz.

"We think Apple still has 2014 catalysts that could restore meaningful, above-peer revenue growth to the model," the analyst said. "The China Mobile launch stands to set the stage for a larger-sized iPhone rollout later this year, which could boost unit sales. Another silver lining is that we think Apple's crossover to 64-bit processors, ahead of the competition, could usher in new features, potentially jumpstarting growth in the next 12 to 18 months."

About the author

Journalist, software trainer, and Web developer Lance Whitney writes columns and reviews for CNET, Computer Shopper, Microsoft TechNet, and other technology sites. His first book, "Windows 8 Five Minutes at a Time," was published by Wiley & Sons in November 2012.

 

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