Apple's Buyback Program Loses Steam Amid Rising Share Price

Apple's share buyback program has been a key factor in its recent growth, but a closer look reveals that it's not as effective as it once was. Over the past year, Apple spent $82.2 billion buying back its own stock, which is comfortably funded by the company's massive cash reserves.

However, the rising share price has made the buyback a worse deal for Apple. As the price climbs, each dollar of buyback retires less stock, reducing the impact on earnings per share. In fact, over the past three years, earnings per share have grown 14.3% annually, while net income grew 11.6%.

The company's installed base of over two and a half billion active devices and more than one and a half billion paid subscriptions has been a key driver of its cash flow, generating $146.7 billion in operating cash flow over the past twelve months against roughly $10 billion of capital spending. Apple's balance-sheet strength is impressive, with net debt of about 0.1 times EBITDA.

However, the company is facing challenges due to memory pricing, which has led to a decline in gross margin from 48% in the June quarter to a guided 47% midpoint for the September quarter. The company's management has described memory pricing as a 'hundred-year flood', and Apple has reluctantly raised prices on iPad and Mac in response.