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Buybacks can be a fruitful endeavor for companies with lots of cash on hand (a good problem to have. For example, over the past decade, Apple (AAPL - Free Report) has repurchased more than half a trillion worth of its own shares. The results speak for themselves.
Image Source: Zacks Investment Research
Buybacks can allow management teams to:
· Inflate earnings per share (EPS):Because buybacks decrease the number of shares outstanding, earnings are calculated against fewer shares. Higher EPS can make stocks more attractive to institutions and individual investors.
· Drive share prices higher: A lower supply of shares and more buying pressure can boost stock prices.
· Have skin in the game: When a company buys back shares, it signals that management has confidence in the future.
· Support dividend payments:Companies can finance dividend payments to shareholders. (CVX has raised its dividend for 36 years straight)
Meta Platforms (META - Free Report) and Chevron (CVX - Free Report) couldn’t be on further ends of the spectrum in terms of their underlying businesses and stocks. Chevron is one of the world’s largest oil producers, a value stock, a dividend payer, and one of the top-performing stocks of the past year. Meanwhile, Meta is a growth-oriented tech stock known for its innovative social media portfolio and is coming off one of the worst performance periods since the stock came public.
Image Source: Zacks Investment Research
Despite their differences, both companies’ management teams have similar strategies in mind to boost their stock prices – massive stock buybacks.
Massive Buyback Programs
Last week, Chevron announced a massive buyback of $75 billion worth of stock after a record year of earnings – tripling its existing buyback program. Not to be outdone, Thursday, Meta increased its buyback plans by $40 billion – last year, the company purchased nearly $28 billion worth of its stock.
Which Stock will Benefit the Most?
If you want to learn more about the animals in the desert and how they act, sit in the desert and watch the animals. By the same token, if you wish to learn which stock benefitted more from a buyback – watch the stock. Shares of CVX fell by 4.44% on above-average volume following the announcement. Conversely, shares of META soared more than 20% on volume nearly four times the average turnover.
Image Source: Zacks Investment Research
While both stocks gave investors good news, the reaction in shares tells investors two different stories. Meta may be ready for a turnaround year, while the good news may already be priced into CVX shares.
Conclusion
Around big news items in the stock market, the reaction to the news is often more important than the news itself. Zuckerberg and META’s management team have injected confidence back into shares of META. Furthermore, META is seeing improving estimates, sports a Zacks Ranking of 2, and has its lowest valuation in years.
Image Source: Zacks Investment Research
For these reasons, META is more likely to benefit in the coming months than CVX from its recent buyback.
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META & CVX Buybacks: Who Benefits Most?
The Power of Buybacks
Buybacks can be a fruitful endeavor for companies with lots of cash on hand (a good problem to have. For example, over the past decade, Apple (AAPL - Free Report) has repurchased more than half a trillion worth of its own shares. The results speak for themselves.
Image Source: Zacks Investment Research
Buybacks can allow management teams to:
· Inflate earnings per share (EPS):Because buybacks decrease the number of shares outstanding, earnings are calculated against fewer shares. Higher EPS can make stocks more attractive to institutions and individual investors.
· Drive share prices higher: A lower supply of shares and more buying pressure can boost stock prices.
· Have skin in the game: When a company buys back shares, it signals that management has confidence in the future.
· Support dividend payments:Companies can finance dividend payments to shareholders. (CVX has raised its dividend for 36 years straight)
Meta Platforms (META - Free Report) and Chevron (CVX - Free Report) couldn’t be on further ends of the spectrum in terms of their underlying businesses and stocks. Chevron is one of the world’s largest oil producers, a value stock, a dividend payer, and one of the top-performing stocks of the past year. Meanwhile, Meta is a growth-oriented tech stock known for its innovative social media portfolio and is coming off one of the worst performance periods since the stock came public.
Image Source: Zacks Investment Research
Despite their differences, both companies’ management teams have similar strategies in mind to boost their stock prices – massive stock buybacks.
Massive Buyback Programs
Last week, Chevron announced a massive buyback of $75 billion worth of stock after a record year of earnings – tripling its existing buyback program. Not to be outdone, Thursday, Meta increased its buyback plans by $40 billion – last year, the company purchased nearly $28 billion worth of its stock.
Which Stock will Benefit the Most?
If you want to learn more about the animals in the desert and how they act, sit in the desert and watch the animals. By the same token, if you wish to learn which stock benefitted more from a buyback – watch the stock. Shares of CVX fell by 4.44% on above-average volume following the announcement. Conversely, shares of META soared more than 20% on volume nearly four times the average turnover.
Image Source: Zacks Investment Research
While both stocks gave investors good news, the reaction in shares tells investors two different stories. Meta may be ready for a turnaround year, while the good news may already be priced into CVX shares.
Conclusion
Around big news items in the stock market, the reaction to the news is often more important than the news itself. Zuckerberg and META’s management team have injected confidence back into shares of META. Furthermore, META is seeing improving estimates, sports a Zacks Ranking of 2, and has its lowest valuation in years.
Image Source: Zacks Investment Research
For these reasons, META is more likely to benefit in the coming months than CVX from its recent buyback.