Just over two weeks ago, Apple was trading near its 52-week low right around $385. Today, shares are trading in the ballpark of $460 as the Mac maker has enjoyed a healthy rally of $75 since then, representing a gain of 20% since the low set on April 19.

That's quite a jump for the largest tech company on Earth. What are all the reasons for investor optimism?

The Cirrus dip
The first thing to remember is that shares were knocked down to those lows in part by audio codec supplier Cirrus Logic . The company's preliminary figures rattled investors since Cirrus noted a "decreased forecast for a high volume product" that had Apple shareholders thinking the worst. While some caution regarding Apple was warranted, the magnitude of the sell-off was not.


Cirrus would go on to plunge again after its full release, even though it already pre-announced.

Changing the game
The announcement also came just days before Apple would report its own earnings results. The operating figures weren't necessarily anything to call home about, even if iPhone units came in better than expected. The real reason why I argued that Apple just changed everything was that the company significantly expanded its capital return program and announced it would take the unprecedented move (for Apple) of tapping the debt markets to fund said program. CFO Peter Oppenheimer said Apple would begin repurchasing shares immediately.

The day after earnings, shares were largely flat (down less than $1). That's a stark contrast to the plunge that shares saw after January earnings. The most apparent explanation for this ambivalence was that investors were still trying to digest the new information, and were effectively underappreciating the extent of the capital structure changes Apple had just outlined.

The very next week, Apple would conduct a $17 billion bond offering, the largest for any non-financial company. The offering consisted of six tranches between three-year and 30-year maturities, which all averaged out to a 1.85% interest rate. This average will change, as two of the tranches have floating rates based on LIBOR that will reset quarterly, covering 18% of the total principal offered.

Apple could easily be looking at hundreds of millions of dollars in savings just from retiring dividend payments, before even considering how much it's saving in taxes by leaving its $102.3 billion foreign stash untouched. All the while, Apple's repurchasing activity could also be supporting shares. Volume has been strong amid the rally, which suggests that it may have some legs as investors jump in, reassured that Apple has their back.

AAPL Chart

AAPL data by YCharts.

Taking on debt will yield some very important benefits to Apple shareholders. The company finally addressed its widely criticized capital allocation program, while the move will reduce Apple's overall cost of capital. It can now get back to focusing on its product pipeline.

With the $75 rally over the past two weeks, perhaps Apple investors are now starting to appreciate the new capital structure.

Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.

The article All the Reasons Why Apple Has Rallied $75 in 2 Weeks originally appeared on Fool.com.

Fool contributor Evan Niu, CFA, owns shares of Apple and Cirrus Logic. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Cirrus Logic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Gumby

Share bujy backs usually goes to big institution investors like your life insurance company or certain others who just cannot sell in the open public without spooking little investors to do same. Apple is just forced to borrow money to buy back shares once Apple realizes that it is running out of good ideas about future new iproducts. Will Apple stoop low to compete against Samsung? No way! Now Intel is coming up with new low power chips that will cost much more than the ARM chip clones that Apple rely on for big margins. Apple will be forced to order Intel chips very soon so profits will be harder to come by. Microsoft is getting its mouth watery and drooling and posie to pounce on Apple with its Surface Pro devices. Apple is much stronger than ten years ago which is wonderful but not strong enough to keep investors happy going forward , anymore. Intel will be the new ARM for a long time to come. ARM might want to consider a hostile takeover of AMD to protect what is being shoved off the table as crumbs down on the floor.

May 06 2013 at 7:34 PM Report abuse rate up rate down Reply