A conversation last week with Apple (NASDAQ:AAPL) chief financial officer Peter Oppenheimer led ISI Group analyst Brian Marshall to believe that an announcement of a dividend increase, buyback, or other form of capital distribution to shareholders was now imminent from the company. That prompted Marshall to reiterate a Strong Buy rating and a $600 price target on the company’s stock.
“While trying to extract information from Apple management is like squeezing ‘water from a rock,’ we did speak with Apple CFO (Peter Oppenheimer) this past Friday and found the conversation helpful,” Marshall wrote in a note to clients. “We touched upon a variety of topics, including capital allocation framework.”
The analyst recommended through his note that Apple increase its current three-year capital allocation plan amount of $45 billion to $60 billion. Half of the company’s annual free cash flow should be returned to the investors, according to the analyst, with two-thirds of the cash going toward dividend and the rest to buy shares back.
A favorable capital allocation update will be the next catalyst for Apple’s shares, the analyst added. Marshall said his firm had begun fielding calls from “smart money” investors who were building positions in Apple at current levels based on the belief that the company had made the transition to a “value play” from a growth story.
Apple said in a press release last week that it was thinking about its capital application practices and that the management was already in talks to increase it.