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Fed's Powell says bank's corporate-credit ETF purchases will give way to individual bond buying

Wed, 06/17/2020 - 2:53pm

  • The Federal Reserve's corporate-credit relief will move from exchange-traded fund purchases to taking in individual bonds, chairman Jerome Powell said Wednesday.
  • Targeted bond purchases are "a better tool for supporting liquidity and market functioning," Powell told the House Financial Services Committee.
  • The statement follows the central bank announcing Monday it would begin individual bond purchases.
  • The Fed's Secondary Market Corporate Credit Facility had only been taking in debt ETFs since it began operations on May 12.
  • Visit the Business Insider homepage for more stories.

The Federal Reserve will transition from its corporate-credit exchange-traded fund purchases toward targeting individual firms' bonds as it looks to further aid market functioning, chairman Jerome Powell said Wednesday.

The statement, made before the House Financial Services Committee, follows the central bank announcing on Monday its move into bond-buying with its Secondary Market Corporate Credit Facility. The relief program has been taking in ETFs since May 12 and kicked off its individual bond purchases on Tuesday.

"Over time we'll gradually move away from ETFs and move to buying bonds," Powell said. "It's a better tool for supporting liquidity and market functioning."

Read more: Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

The facility will buy up to $250 billion in corporate bonds and ETFs, while the Fed's Primary Market Corporate Credit Facility will directly take in up to $500 billion in debt offerings once it becomes operational. The central bank also announced Monday it would "create a corporate bond portfolio that is based on a broad, diversified market index of US corporate bonds," assuaging some concerns it would extend broad market relief unevenly.

The Fed's March 23 announcement that it would move into corporate-debt markets sparked a rapid turnaround for risk assets. Stock and bond valuations began a months-long rally that eventually placed the stock market within spitting distance of record highs. Before a single bond was bought up by the Fed, the S&P 500 turned year-to-date positive and subsequently fell below the key threshold on renewed pandemic fears.

Powell has repeatedly noted the SMCCF is primarily tasked with aiding market functioning, yet lawmakers in the Senate and the House of Representatives questioned the chair on whether such relief was still necessary. Investors quickly adopted risk-on attitudes after the Fed's March announcement, allowing firms to easily offer new debt. The chairman noted that market functioning has significantly improved and that the central bank will "put the tools away" once they're no longer needed.

"The markets are working," Powell said. "Companies can borrow, people can borrow. Companies are not showing tons of financial stress, and they're less likely to take cost-cutting measures." 

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Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

Wed, 06/17/2020 - 2:52pm

  • The recent strength of international and value stocks relative to their US and growth counterparts could be unexpectedly persistent, said Jeffrey Kleintop, the chief global investment strategist at Charles Schwab.
  • Major transitions like these tend to happen at the start of new economic cycles, he added.
  • During a recent Business Insider webinar, he explained why investors should consider rebalancing their portfolios and shared three areas that could emerge as new market leaders. 
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Stock-market investors have been pricing in a recovery from the coronavirus crisis for a few months now. But a uniquely significant development occured mid-May. 

That was when investors transitioned from wagering on a long and painful comeback to seriously considering a snapback that blows past consensus forecasts for the economy. 

For proof of this game changer, look no further than the uptick in stocks that are most sensitive to the economy's gyrations. Cyclical stocks, which had largely ebbed and flowed, began a more convincing rally that showed investors were becoming more bullish.

The rebound lifted two groupings of stocks that contain many cyclicals: value stocks that are considered cheap relative to company fundamentals, and non-US stocks. For Jeff Kleintop, the chief global investment strategist at Charles Schwab, these gains are likely not short-lived flukes. 

He views the newfound leadership of value and international stocks as a moment of transition away from the last decade in which growth and US were the best performers. 

"If that's sustained — and I think it will be by the ongoing economic recovery – this new market leadership in the second half of the year could catch a lot of investors by surprise," Kleintop told Business Insider during a recent webinar

Read more: 'A textbook recession-recovery trade': 3 Wall Street stock-strategy titans explain why the market's latest plunge is actually 'healthy' — and share their views for what's next

Such a handover should not perplex students of history because it would mimic transitions that occured after the two most recent recessions.

In the run up to the dot-com bubble, growth and predominantly technology stocks outpaced value stocks. Value then took over and enjoyed its time in the sun in the years leading up to the 2008 financial crisis. And in the 12 years since then, growth has been the big winner. 

These handoffs between growth and value are illustrated in the chart below: 

A similar cycle has been in place between US and international stocks. Kleintop found that the regime change tends to coincide with the inversion of the yield curve, one of the most reliable indicators that an economic expansion is about to end.

Now that the economy is in another period of transition, Kleintop sees the wheels turning again. He acknowledged that his view is somewhat contrarian, given how strongly US-tilted and growth investors have performed over the past decade. 

"What do investors do when markets get difficult? They tend to backtrack," Kleintop said. "They look at old leaders and they expect them to be the ones that lead once again."

He does not foresee growth and US stocks performing terribly in the second half of the year and onwards. Instead, he says it is time to consider rebalancing your portfolio if it is stuffed with the old winners. 

He noted three areas that could emerge as new market leaders as the rotation runs its course:

  1. International stocks, which can be broadly acquired through the iShares MSCI EAFE exchange-traded fund
  2. Financial stocks that are represented in the Financial Select Sector SPDR exchange-traded fund.
  3. Industrials, captured by the Industrial Select Sector SPDR Fund.

Read more: 

SEE ALSO: How to navigate a chaotic market: Exclusive video discussion with 3 top Wall Street stock strategists

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Hertz shares halted after SEC raises issues with plan to sell potentially worthless stock

Wed, 06/17/2020 - 2:51pm

  • Hertz shares were halted on Wednesday morning after the Securities and Exchange Commission said it had issues with the company's planned stock offering.
  • The car-rental chain aims to sell as much as $500 million worth of stock in a fundraising effort, though it has said the shares could become worthless through bankruptcy proceedings.
  • "We have comments on their disclosure," SEC Chairman Jay Clayton told CNBC on Wednesday, adding that, in most cases, firms with such issues "do not go forward until those comments are resolved."
  • Hertz shares were frozen at $1.95, down slightly from Tuesday's close.
  • Watch Hertz trade live here.

Trading of Hertz stock was paused on Wednesday morning after the Securities and Exchange Commission alerted the firm to issues it had with a planned stock sale.

The car-rental chain filed for bankruptcy on May 22 and has since seen its stock price trade with outsize volatility as retail traders bet on a miraculous recovery. Hertz's latest fundraising plan involves selling up to $500 million in stock to take advantage of its recent rally. But the SEC has raised concerns about such a sale.

"In this particular situation, we have let the company know that we have comments on their disclosure," Jay Clayton, the chairman of the SEC, told CNBC on Wednesday. "In most cases when you let a company know that the SEC has comments on their disclosure they do not go forward until those comments are resolved."

Read more: Heath Jones is a US Army neuroscientist whose side hustle is scooping up real-estate properties for passive income. Here's how he leverages a simple strategy for extra cash.

Hertz told sale participants in a filing on Thursday that "the common stock could ultimately be worthless" if the firm goes bankrupt, as bondholders and other creditors are first in line to see their cash returned. Selling stock at such a precarious condition is highly irregular.

Shares halted at $1.95, down 0.1% from Tuesday's close. Hertz stock had jumped as much as 21% earlier in the day before the pause.

Clayton said that Hertz was aware of the agency's issues, but he didn't specify whether the firm aimed to continue with the sale before addressing the concerns. The SEC's cautionary statement is relatively normal and doesn't require Hertz to cancel its sale.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

Hertz shareholders could also see their holdings turn worthless because of the New York Stock Exchange. The company received a delisting notice on May 26, four days after announcing its bankruptcy filing. Hertz appealed the notice, and shares will continue to trade publicly pending a hearing with the NYSE.

"There can be no assurance ... whether there will be equity value in the Company's common stock" should it be delisted, Hertz said in a regulatory filing last week.

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Goldman Sachs says renewable-energy spending will surpass oil and gas for the first time ever in 2021 — and sees total investment spiking to $16 trillion over the next decade

The White House steps up trade aggression, calls for 'broader reset' of global tariffs

BANK OF AMERICA: Buy these 13 cheap stocks that have unexpectedly strong finances, making them great bets for the next phase of the rally

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Mortgage applications to buy a home surge to the highest in 11 years as rates hit a survey low

Wed, 06/17/2020 - 2:50pm

  • Mortgage applications to buy a home spiked 4% last week to an 11-year high, the Mortgage Bankers Association said on Wednesday.
  • The jump in demand was likely fueled by falling mortgage rates — the fixed 30-year rate fell to 3.3%, the lowest in the MBA survey's history.
  • That led to a 10% spike in refinance applications as existing homeowners sought lower rates.
  • Read more on Business Insider.

Homebuyers are flocking back to the housing market as the US economy opens up from the coronavirus pandemic, fueled by record-low mortgage rates and pent-up demand.

Mortgage applications to purchase a home spiked 4% last week and were 21% higher than in the same period one year ago, the Mortgage Bankers Association said on Wednesday. The ninth straight week of gains in the purchase index pushed it to its highest level in 11 years, the report said.

"The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a statement.

Read more: Heath Jones is a US Army neuroscientist whose side hustle is scooping up real-estate properties for passive income. Here's how he leverages a simple strategy for extra cash.

Falling mortgage rates added fuel to the homebuying fire — the average contract interest rate for the common 30-year fixed-rate mortgage fell to 3.3% from 3.8% in the week, representing a record low for the survey. Other measures of the 30-year rate have also recently dipped to record lows.

The record-low rates sparked a significant jump in refinancing activity, which had been falling in recent weeks. Last week, refinancing applications spiked 10% and are now a staggering 106% higher on the year, the MBA said.

"Refinancing continues to support households' finances, as homeowners who refinance are able to gain savings on their monthly mortgage payments in a still-uncertain period of the economic recovery," Kan said.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

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'Foolish to stand in the way': Fed support and the day-trading boom will drive stocks higher, an analyst says

Wed, 06/17/2020 - 2:50pm

  • Stocks will rise because the Federal Reserve and the day-trading boom are driving up prices, the Bianco Research chief James Bianco told CNBC's "Fast Money" on Tuesday.
  • The Fed's decision to buy individual corporate bonds has put a "massive floor on this market," Bianco said.
  • David "Davey Day Trader" Portnoy and his "retail bros" are piling into stocks because they're confident the Fed will shore up prices, making it tough to be bearish right now, Bianco said.
  • "You have to find something that says it's going to be so powerful to bring the market down that even the Fed's unlimited printing and the Davey Day Trader crowd buying like mad is not going to be able to stop it," he said.
  • Visit Business Insider's homepage for more stories.

Stocks will climb higher because the Federal Reserve is shoring up prices and day traders are buying without fear, James Bianco, the president of Bianco Research, said on CNBC's "Fast Money" on Tuesday.

The US central bank's unprecedented interventions — which now include plowing up to $250 billion into individual corporate bonds — have "put a massive floor on this market," the investment analyst said.

That safety net, combined with easy access to zero-commission and fractional trading across multiple platforms, has sparked a surge in retail investing, Bianco said. Notably, the Barstool Sports founder David Portnoy, who goes by the nickname Davey Day Trader, now captains an "army" of day traders, or "retail bros."

"When you talk to them or read the Reddit boards, the word 'Fed' always comes up — that they are not going to allow the market to go down," Bianco said.

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

The combined forces of Fed Chair Jay Powell and Portnoy's trader platoons make it difficult to justify a bearish stance, Bianco continued.

"You have to find something that says it's going to be so powerful to bring the market down that even the Fed's unlimited printing and the Davey Day Trader crowd buying like mad is not going to be able to stop it, it's still going to fall," he said. "That's a high hurdle."

However, Bianco cautioned that stocks were already overvalued and that "there will be a reckoning somewhere down the line," for instance, if the economy reopens but fails to bounce back.

Read more: Schwab's global investing chief says the market's best-performing stocks are due for a surprising rotation for the first time in 12 years — and shares 3 ways to get ahead of the shift

Bianco made similar comments on CNBC's "Trading Nation" on Tuesday.

"This is a market that's destined to go higher," he said, adding that "we could have new highs before the end of the year."

Bianco, who moved entirely to cash in early March in response to the coronavirus threat, rationalized his shift from bear to bull.

"I did not appreciate what the Fed's actions to support the market were going to do to the retail community," he said.

Read more: Main Street traders have been crushing Wall Street in recent months. Goldman Sachs breaks down what retail investors should buy to keep winning — and lists the 12 stocks leading the charge.

"There's been a massive flood of money" from retail investors, he said, because they believe that markets "always go up, you can't lose, the Fed is there."

The retail inflows show few signs of stopping and threaten to inflate an already overvalued market, Bianco added. The frenzy could be halted by a second wave of coronavirus infections, a sluggish economic recovery, or a change in the Fed's behavior, he said.

But for now, he said, "I think it's foolish to stand in the way of it."

Read more: Famed short-seller Andrew Left lays out his methodology for finding the stock market's weakest links — and says he's terrified of newbie day traders that think they can outsmart Carl Icahn and Warren Buffett

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The global commercial payment market is worth $125 trillion and ready for a shakeup. Mastercard's new solution is setting out to modernize the industry.

Wed, 06/17/2020 - 1:45pm

  • Though digital technology has transformed many parts of the business landscape, commercial payments have been slower to adopt automation.
  • There are many benefits to automation, including improving cash flow.
  • Mastercard recently introduced Mastercard Track Business Payment Service, which allows buyers and suppliers  to more seamlessly connect and share payment-related data.

Digital technology has radically transformed many parts of the business landscape, but one key area has lagged far behind: commercial payments. Many companies still use paper checks, manage payment terms in spreadsheets, and manually reconcile invoices — all of which can lead to costly payment delays, confusion, and mistakes.

The past few months have only complicated the situation. More people are working from home, and businesses and their employees are adjusting to new processes, while trying to maintain and bolster their operations. Automating business payments can significantly improve cash flow at a time when many companies are cash constrained. One thing is clear: The $125 trillion global commercial payment market is due for a shakeup.

Last September, Mastercard outlined a vision to modernize business payments: It wants to eliminate paper-based processes for buyers and suppliers and improve how buyers and suppliers pay and get paid. The result is Mastercard Track Business Payment Service. Managed through a single, open-loop network, it allows buyers and suppliers to connect and share payment-related data using common rules and standards. As a result, buyers and suppliers don't waste time going back-and-forth about payment-related issues. Suppliers have access to rich, usable remittance data with every payment, reducing the number of inquiries they need to make to buyers and the amount of time they have to spend on reconciliation.

"Business-to-business payments are complex. Due to the lack of standardization and the bilateral nature of our ecosystem, there is a challenge for businesses to manage cash flow," says James Anderson, executive vice president of global commercial products at Mastercard. "It's time for commercial businesses to get value out of the accelerated digital shift through improved cash flow."

The cost of outdated processes

As business becomes faster and more global than ever, commercial payments have become increasingly complex. Customers and their payment partners have different systems and practices for accounts payable and accounts receivable, as buyers and suppliers are scattered across the world.

However, even as companies have leveraged technology to provide efficiencies in industries such as manufacturing and marketing, as well as many other areas, systems are marked by outdated communication methods — emails, phone calls, faxes, portals — that slow things down.

Accounts payable employees spend 30%1 of their time on manual tasks and answering payment-related questions. These inefficient, mistake-prone communication processes are costly and time-draining. Suppliers are left to make sense of information spread out between disparate systems for reconciliation. Every month, most suppliers have to log into more than 10 portals to retrieve critical data.2

These issues can have a dire impact on business growth. The lag between invoice-receipt and payment can delay delivery of goods and services, disrupt cash flow, and impact buyer-supplier relationships.  In fact, nine out of 10 business-to-business suppliers in the US reported frequent late payments by their customers2, with an average payment delay of 33 days — beyond the standard 30-day window.

Fraudsters have taken notice of the flaws in the current payment system as well. Inefficient processes and risky methods of sharing information contribute to the $3 billion in annual losses through business email compromise3.

Worldwide efficiency and security

Mastercard Track Business Payment Service drives efficiency for all parties in the transaction, with suppliers in particular gaining more control over their cash flow by systematically enforcing payment preferences and terms through parameters such as transaction size. They also receive the critical information they need for each transaction — rich, real-time data exchanges that enable simple and seamless reconciliation and revenue recognition.  For buyers, the solution improves working capital as it optimizes opportunities for card payment rebates, and early payment discounts. In addition, the solution satisfies the needs of global commerce, providing one connection for multiple payment types. The open-loop network allows for connectivity to many payment agents, payment types, and currencies across numerous countries.

Mastercard Track Business Payment Service also provides heightened security. Every enrolled business and agent receives a unique payment ID to codify transaction counterparties and safeguard sensitive bank account information.

Expanding around the globe

With the launch of Mastercard Track Business Payment Service in the US, Mastercard is now expanding it into Latin America, Europe, the Middle East, Africa, and Asia Pacific in 2020. Later this year, automated clearing house (ACH) payments will be added to the service and cross-border payments will arrive in 2021.

Digital technology has become intertwined with how people live, allowing them to pay bills, order takeout, and do countless other tasks simply by pushing a few buttons. It's long past time for business payments to enter the digital era, and for businesses to benefit from these same digital, simple, and seamless experiences.

Find out more about Mastercard Track Business Payment Service.

This post was created by Insider Studios with Mastercard.

1. B2B, How the next payments frontier will unleash small business, Goldman Sachs, 2018 2. Apex Analytix, 2017 Financial Leaders' Benchmarking Report 3. "Business E-Mail Compromise: Cyber-Enabled Financial Fraud on the Rise Globally," Federal Bureau of Investigation, February 2017

 

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MORGAN STANLEY: 12 tech trends are accelerating because of COVID-19 — and these stocks are most likely to benefit (AMZN, MSFT, AAPL, GOOGL, MS)

Wed, 06/17/2020 - 1:19pm

  • Morgan Stanley published a note on Wednesday identifying the 12 tech trends that are accelerating because of COVID-19 and the companies most likely to benefit from them.
  • The trends include a faster adoption of cloud services, wider use of e-commerce services, and the growth food-delivery apps.
  • Visit Business Insider's homepage for more stories.

The COVID-19 disruption has served as a wake-up call to many companies, as the pandemic is requiring a greater digital presence for businesses to succeed.

Retailers are scrambling to enhance their e-commerce offerings, while restaurants are beefing up their online delivery capabilities. Every company is now looking to add some kind of cloud service as more business is done remotely.

In light of this change, Morgan Stanley identified 12 of the most important tech themes to follow across technology, retail, food, and health sectors. While all of these trends were already under way before the COVID-19 pandemic, they've grown in importance amid the pandemic, the investment bank wrote in a note published Wednesday.

"These trends are likely to drive structurally higher investment in technology and prove sustainable long-term, as the benefits of digitalization last well beyond the pandemic," the note said.

Listed below are the 12 tech themes that Morgan Stanley believes are accelerating because of the COVID-19 disruption, and the firm's explanation for each trend (plus the companies most affected by it):

    1. Accelerating public-cloud adoption: "Leveraging the public cloud is becoming key for business survival as companies focus on improving connectivity during COVID-19. As a result 89% of CIO survey respondents (in March) signaled they expect to accelerate public cloud adoption." (AMZN, MSFT, GOOGL, CRM, WDAY, etc.)
    2. E-commerce: The two-year pull forward: "2020 is setting up to be an e-commerce inflection year as the combination of shelter-in-place, lower spend on experiences (dining out, bars, travel, etc), and gov't stimulus have driven dollars online." (AMZN, CHWY, EBAY)
    3. Accelerating contactless payments: "The market assumes that COVID-19-related adoption of digital payments is a nearterm benefit for Payments providers, offsetting some of the consumer spend headwinds. However, digitization of Payments is part of a multi-year secular growth driver in Payments, with COVID-19 as just the latest accelerator." (V, MA, PYPL, AAPL, LYV, etc.)
    4. Food delivery digs into restaurant total addressable market: "We see '20 as an inflection year within online food delivery, essentially pulling forward ~1.5 years of consumer spend and 3 years of penetration and while unit economics are improving, the potential entrance of JET complicates the push for consolidation/rationalization which we think is needed." (UBER, GRUB)
    5. Death of paper, rise of automation: "The flexibility to WFH has the potential to accelerate declines in the commercial printing market. The digitization of business processes is likely to compound these declines, but presents an opportunity for tech vendors that can offer digital experiences." (DOCU, CRM, NOW, APPN, MSFT, SMAR, etc.)
    6. Digital entertainment and network connectivity on the rise: "We believe COVID-19 and the increased demand for connectivity has amplified the importance of 5G network rollouts, for which we see mid-band spectrum as a critical catalyst, to support secular growth in categories including video and music streaming, and online gaming." (NFLX, SPOT, DIS, TMUS, AMT, CCI, etc.)
    7. Data as the differentiator: "COVID-19 is accelerating the digitization of workflow solutions which generates faster data growth and use of analytics, allowing businesses to derive data-driven insights, improve competitive advantages and profitability, and drive structurally higher IT spend." (VRSK, TRI, EFX, TRU, NVDA, etc.)
    8. Navigating tensions on the global trade map: "Trade tensions in semis lead to short-term challenges (volatile customer inventory behavior around tariffs and buffer stocking), intermediate-term challenges (Chinese customer preferences for non-US silicon) and longer-term challenges (incentives for countries to invest in competing supply chains)." (ST Micro, NXP)
    9. Collaboration tools: working together when working apart: "Our survey indicates a 2 year pull forward of the TAM as WFH drives demand for collaboration tools on the cloud and large platform players, particularly where the transition is more difficult (e.g. telephony, VDI, team collaboration)." (ZM, MSFT, WORK, TWLO, RNG, etc.)
    10. Ad spend shifting from offline to online: "We expect online advertising to recover faster than other ad verticals given its leading reach, return on investment and direct measurability, and see a significant opportunity to capture increased SMB ad spend with a push into social commerce." (GOOGL, FB, SNAP)
    11. Jump-starting the heartbeat of health tech: "We think investors don't fully appreciate the impact COVID-19 will have on accelerating big tech's entrance into healthcare. In the past 3 months we've seen a significant shift in consumer preferences towards digital health solutions, which we believe is here to stay. Regulatory barriers are also coming down, opening the door for new entrants." (AAPL, AMZN, GOOGL, MSFT, FIT, etc.)
    12. AR/VR to usher in a new medium for digital interactions: "COVID-19 should help expand AR/VR use cases because the need to interact at a distance has never been so mandatory, ushering in a whole new normal for how people will approach in-person interactions in the future." (AAPL, MSFT, GOOGL, FB, SNAP, etc.)

SEE ALSO: In a leaked document, Amazon employees shared stories of racism and gender discrimination while calling for a new leadership principle on 'inclusion'

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Apple hits record high as RBC upgrade says stock can climb 11% from current levels (AAPL)

Wed, 06/17/2020 - 12:50pm

  • RBC Capital Markets upgraded its Apple price target to $390 from $345 on Wednesday, an 11% jump from where shares currently trade. 
  • Apple shares rose nearly 1% to a fresh all-time high of $355.37 on Tuesday. 
  • On Tuesday, Citi also upgraded shares of Apple to a Wall Street-high of $400.
  • RBC's new price target comes after the firm did a deeper dive on Apple's share repurchase program. 
  • Watch Apple trade live on Markets Insider.
  • Read more on Business Insider.

Shares of Apple rose nearly 1% Wednesday, hitting a fresh all-time high of $355.37 in intraday trading. 

The move higher may have been driven by a group of recently boosted price targets for the Cupertino, California-based company. On Tuesday, Citigroup upped its price target to $400, a Wall Street high for Apple. 

RBC Capital Markets followed suit Wednesday, raising its price target on shares of Apple to $390 from $345, signaling that the stock could gain another 11% from current levels. The firm also reiterated its "outperform" rating on shares. 

RBC's new price target comes after the firm did a deeper dive on Apple's share repurchase program, which has a pace of about $70 billion annually. 

"AAPL remains in a league of its own when it comes to share repurchases," wrote RBC analyst Robert Muller in the Wednesday note. "While AAPL's significant capital return program is well known by the market, we do not believe the market is giving enough credit for the financial impact."

Because of its rapid clip of share repurchases, Apple can still grow earnings per share at an annual rate of about 3.5% in the next five years, according to RBC's estimates. This implies that the "potential uplift from the upcoming 5G upgrade cycle is being discounted by the market," Muller wrote. 

Read more: Wall Street's best US and international stock-pickers have tripled their clients' money since 2010. The duo break down 5 future-proof companies that will keep investors ahead of the pack through 2030.

In addition, RBC estimated that Apple has the runway to maintain its current buyback activity through mid-2023 with no organic growth, and could at that point repurchase shares at a rate of $5 billion annually without affecting its net cash position. 

To arrive at its updated  price target, RBC increased its target multiple for Apple to 24x from 21x applied to its calendar-year 2021 earnings estimate. 

"With the macro backdrop slowly improving following the initial COVID-19 pullback, and as the economy has begun to reopen, we believe we are justified in utilizing a multiple more in line with its high-tech peers," said Muller.

He added that the multiple still lags the median 29x of the "FAANGM" peer group, which includes Facebook, Apple, Amazon, Netflix, Google, and Microsoft. 

Apple has gained roughly 21% year-to-date.

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