5 Companies Buying Back Their Own Stock Hand Over Fist As the Stock Market Sells Off
When the stock market falls sharply, as it did on Nov. 5, when the Nasdaq Composite dropped nearly 6% in a single day and closed in correction territory, most investors focus on what they should buy. But some companies are aggressively buying back their own stock, and some can now buy it at a discount, which could help deliver even more shareholder value.
The math is simple. A company that spends $1 billion on its own stock retires more shares when the price is lower, which increases each remaining shareholder’s ownership stake. Lam Research, for example, bought back stock in September at prices that look to be around $326 per share. At Thursday’s close of about $203, each $1 billion spent on buybacks would retire about 60% more shares.
With that in mind, here are five companies buying back their own stock aggressively right now.
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1. PayPal
PayPal (PYPL +0.78%) has been one of the most aggressive repurchasers on the market in recent years. Over the past 12 months, the fintech giant has spent $6 billion buying back about 117 million shares, and its diluted share count has fallen by about 11% from a year ago. The business is improving, too, as new leadership focuses on efficiency and growing the core branded checkout business. I own PayPal stock, and with the stock trading at about 10.5 times forward earnings, these buybacks look like a smart use of cash.
2. General Motors
General Motors (GM -2.52%) just finished a $6 billion buyback program and immediately authorized a new $20 billion one, which is about a quarter of its market value. That’s an aggressive buyback pace. GM had 849 million shares outstanding at the end of September, a figure well over 1 billion just a few years ago. With adjusted automotive free cash flow guidance raised to $11.5 billion to $12.5 billion this year, GM can afford it. The automaker is one of the largest holdings in my portfolio, and at about 6 times forward earnings, I’m happy to see it reduce its share count.
3. EPAM Systems
IT services company EPAM Systems (EPAM -5.19%) recently raised its buyback authorization to up to $1.8 billion and plans a $500 million accelerated share repurchase this month. It has also committed to returning at least half of its free cash flow to shareholders every year from 2027 through 2029. Its diluted share count is already down about 8% from a year ago, and it’s likely to decline further. Unlike most of the market, EPAM’s stock jumped 21% on Nov. 5 after earnings, but it remains well below its 52-week high.
4. Lam Research
Semiconductor equipment maker Lam Research (LRCX +8.41%) announced a new $25 billion buyback authorization on Nov. 5, the same day its stock fell sharply. That’s roughly 10% of the company’s market value. CFO Doug Bettinger said Lam’s “robust cash generation” gives management confidence in the aggressive repurchase plan. Lam’s revenue grew about 54% last quarter, and the stock is now more than 50% below its 52-week high.
5. Airbnb
Airbnb (ABNB +12.32%) paired a strong third-quarter report with a new $12 billion buyback authorization, on top of the $2.7 billion remaining under its existing program. With $4.9 billion in free cash flow over the past year and billions on its balance sheet, it has the cash to back it up. One caveat: Airbnb says it uses buybacks partly to offset dilution from stock-based compensation, so its share count is down only about 3% from a year ago.
The bottom line
Let’s be perfectly clear. We have no idea whether any of these companies are buying back stock right now or how much they’re buying back while the market is down. We simply know their aggressive buyback authorizations, and these are companies that are dramatically reducing their share counts.
To be sure, buybacks aren’t automatically good for shareholders, and most aggressive buybacks carry risks. To name three, EPAM is funding part of its accelerated buyback with borrowed money, Lam’s business is cyclical, and PayPal’s free cash flow fell 17% last quarter. But companies with strong balance sheets that buy back stock during sell-offs tend to reward patient shareholders. These five are putting real money behind their confidence.
Matt Frankel, CFP® has positions in General Motors and PayPal and has the following options: long January 2027 $75 calls on PayPal, long January 2027 $95 calls on PayPal, short January 2027 $135 calls on PayPal, and short January 2027 $85 calls on PayPal. The Motley Fool has positions in and recommends Airbnb, EPAM Systems, Lam Research, and PayPal. The Motley Fool recommends General Motors and recommends the following options: short December 2026 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.