Apple Shares Fall 5% as iPhone Maker Pulls Back on Buyback Program

Apple stocks dipped by close to 5% in May 2 market trading, Reuters reported. The fall in Apple share prices was triggered by theiPhone maker’s decision to trim its buyback program.

The drop also came soon after CEO Tim Cook raised concerns over tariff costs that could cost the company close to a billion this quarter as the China-US trade war rages.

Apple Trade War Costs

On May 1, Apple reduced its share buyback program by $10 billion. The decision to reduce its stock buyback points to Apple’s desire to preserve cash in the current uncertain environment. Typically, the company has opted to either maintain or increase repurchase levels.

“The $100 billion buyback announced is below the $110 billion announced a year ago, which we found as a bit of a head-scratcher, as Apple historically either holds its buyback or increases its authorization,” CFRA Research Analyst Angelo Zino.

In a call with analysts on May 1, Cook laid bare the impacts of Trump tariffs on the California-based iPhone maker. Apple produces over 90% of its tech products in China.

President Trump’s tariff flip-flops have thrown Apple’s plans into disarray even as it struggles to maintain its title as the most valuable company in the world. According to Cook, the Apple tariff costs could add up to $900 million in production costs this quarter alone.

Although President Trump has so far exempted electronics from import levies, the US has indicated that it could impose tariffs in the coming weeks.

Expansion Plans

Apple is planning to move its vast iPhone supply chain from China to India as it seeks to minimize impacts of President Donald Trump’s tariffs.

“It looks like Apple is progressing faster than expected with its move to shift production of US phones into the region (India),” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Cook also talked about Apple’s plan to spend $500 billion in US expansion. He said this plan involves increasing operational expenses and capital outlays as it sets up server and chip production facilities with different partners.

Analysts warned that Trump tariffs could push iPhone prices in the US up if the company opts to pass the additional costs to consumers. However, Cook explained its stockpiling process to ensure that it does not source most of the devices it sells in the US from China this quarter. The company also secured an exemption for consumer electronics, which has given the company temporary relief.

Analyst’s Take

Analysts said they expected Apple’s profit hit to exceed the $900 million forecast issued during the call. However, they upheld Apple’s manufacturing relocate views, terming India a life raft supply chain as the iPhone maker navigates the tariff turbulence.

Apple’s trouble in the Chinese market did not start with the start with the tariffs. The company has been facing stiff competition in the Chinese market from local rivals like Huawei due to delayed rollout of its AI features.

“The question for investors is what can replace China for Apple? This is not an easy question to answer and could threaten the long-term trajectory of Apple’s growth plan,” XTB Research Director Kathleen Brooks said.

Apple peers like Microsoft, Alphabet, and Meta exceeded their quarterly targets. Their performance was attributed to artificial intelligence. However, Amazon reported a drop in its cloud revenue growth. The results of these big techs contrasted the forecasts of electronic companies such as Samsung, Intel, and chip manufacturer Qualcomm.

Some analysts say that demand for iPhone in the US could reduce as customer confidence slips. Apple stocks have lost 15% since the year started. This is significantly high compared to Meta’s 2.3% drop and Microsoft’s 1% rise. Apple’s annual price-to-earnings ratio currently stands at 27.63, compared to Meta’s 21.48 and Microsoft’s 28.64.

The company reported quarterly revenues of $95.36 for the quarter and announced a $1.65 profit per share.