Buyback Wednesdays – Alphabet Announces A Massive $70 Billion Stock Buyback

Google’s parent Alphabet (GOOG) announced a massive $70 billion stock buyback after reporting Q1 2022 results yesterday. Unfortunately those results did not give the market a lot of confidence as they came in below consensus analyst estimates driven in part by a slowdown in ad revenue at YouTube and a $1.07 billion loss on investments (equity securities). This overshadowed a 23% increase in revenue to $68 billion and a 22% increase in operating income to $20 billion. The stock, which was already down 3% in a weak market yesterday, is down another 3% today.

Alphabet is second only to Apple (AAPL) in announcing large buybacks and then following through on those announcements. This $70 billion announcement eclipses the $50 billion buyback they announced last April. Facebook’s parent Meta Platforms (FB) also announced a $50 billion buyback last October when the stock was trading at $328.69. It will be interesting to see if they increase their buyback allocation when they announce results after the market closes today.

While these stock buybacks are large in absolute dollar terms, considering the large market caps of these companies, they don’t often end up retiring a significant portion of their shares outstanding. Their shares outstanding are also constantly impacted by high stock-based compensation. The buyback announcement by Google represented 4.43% of its $1.58 trillion market cap at announcement.

It was interesting to see that two of the five top buybacks during the last week were from regional banks. We have been seeing a lot of M&A activity, insider purchases and buybacks among regional banks. They benefited from the PPP loans and are probably going to do well in a high interest rate environment as long as they don’t have sizable exposure to mortgage origination, derive a lot of income from asset management or generate revenue from trading activities.

Northeast Bank (NBN) announced a buyback representing nearly 14% of its market cap at announcement. This Portland, Maine based regional bank has $1.57 billion in assets and trades at 1.19 times tangible book value. In contrast, Regionals Financial (RF), which announced a 12% buyback, has $164 billion in assets and trades at 2.11 tangible book.

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