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The bank slashed its price target for the iPhone maker for the second time in two months on Monday.
In a note titled "It Might Rain on Buyback Exuberance," Barclays put a price target of $157 on Apple, down from $168, representing a nearly 5 percent downside from Monday's close.
The problem it sees is that many people are holding the stock because of high expectations around capital return. Apple said that it will bring back its offshore cash of around $258 billion to the U.S. following President Donald Trump's plan to reduce the tax rate on money repatriated to America.
Many analysts expect Apple to announce a significant share buyback program and dividend increase. Barclays said that many investors are holding Apple stock in hope of a payout, but the risk is that Apple could give back less than expected, because more money needs to go to acquisitions due to the possibility of weaker iPhone sales.
"Our concern is that a weaker iPhone franchise could require the company to allocate more cash to M&A," Barclays said in the note.
"In contrast, we think many holders are in the stock for capital returns being the main beneficiary of excess cash. As a result, there could be a sell on the news event around the... earnings call if capital returns are only in line with expectations, set against a backdrop of softening earnings power."
Barclays analysts said that Apple could return $84 billion to shareholders in addition to the $52 billion left under the current $300 billion capital return program. This could consist of $21 billion in dividends and $63 billion in share repurchases.
The bank has a lower expectation on buybacks than other analysts. Morgan Stanley expects Apple's capital returns program to total $210 billion in shares and $52 billion in dividends, leaving $30 billion for acquisitions.
Barclays has calculated that Apple's cash, after subtracting its debt, would be $162.7 billion. It would need to pay $16 billion back to the Irish taxman and $38 billion in repatriation tax. Barclays estimates that Apple will keep $10 billion for mergers and acquisitions (M&A), invest $10 billion in U.S. data centers, and put $5 billion into its advanced manufacturing fund.
Of course, Apple may not decide to use any of this cash to pay down debt and, instead, put it towards other things.
The bank's concern, however, is that investors are relying too heavily on a big returns program.
"We think the market has shrugged off weaker demand in expecting a big pay day from Apple," Barclays said.
Given the weaker iPhone demand expected, Barclays said M&A would be necessary. Apple hasn't typically done large mega-deals, but it may need to consider "more strategic and transformational acquisitions and in investments" to continue growing average revenue per use, and its crucial services business that includes products like Apple Music, Barclays said.
Areas of investment could include cloud-related services targeting enterprise users, investment in original Apple game titles, especially in augmented reality, and original content to battle Netflix and Amazon, Barclays noted.
The increased need for M&A could reduce the capital returns, which could disappoint investors.
"The aggregate commitment could easily require at least $10-20 billion, which could cause some disappointment for investors who have been expecting a full capital return this year," the analysts said.