Bernstein Sees 13% Downside In Apple - Read Why - Apple (NASDAQ:AAPL)

Bernstein analyst Toni Sacconaghi notes that while Apple Inc's AAPL EPS has been strong over the last eight years, the company has not benefited from operating leverage.
The analyst has a Market Perform rating and a price target of $132, implying a 12.6% downside.
Share buybacks and a lower tax rate have been critical drivers of EPS growth, adding 400 to 600 bps and 200 bps per year, respectively.
"Incredulously, strong buybacks could continue for another 15 years," Sacconaghi says if Apple decided it was comfortable taking on leverage.
His analysis suggests that Apple is likely to be able to continue repurchasing about 3%-4% of its shares per year until the end of 2026 while growing its dividend per share by 10% annually without taking on net debt on its balance sheet. At which point, Apple will have likely repurchased about 15% of its current shares outstanding.
Apple's ongoing buyback program provides a relatively clear path to high single-digit EPS growth or better for the next five years, assuming its hardware revenues do not decline and its service segment grows at historical mid-teens.
Price Action: AAPL shares traded higher by 2.26% at $154.42 on the last check Wednesday.

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Bernstein Sees 13% Downside In Apple - Read Why