Stock buybacks can help move share prices higher in two ways. First, they simply act as buying pressure on a stock. Second, they help reduce the total share count, so a company can increase its earnings per share without increasing earnings.
A number of companies have been increasing share buybacks as their operations have improved over the past year. One such player just made a huge increase to its buyback.
That company is
Advanced Micro Devices (AMD). One of the best-run chipmaking companies, it’s benefiting from the tailwinds of strong demand for semiconductor chips right now.
The company just unveiled an $8 billion buyback program, in addition to the prior program that still has $1 billion set aside. At the stock’s current market cap, $8 billion will reduce the number of shares outstanding by over 4 percent.
Action to take: Shares are up 35 percent over the past year, but are down nearly 25 percent from their 52-week highs, leaving them in bear market territory for now. This looks like a good time to start accumulating shares, although shareholders don’t get paid a dividend from this company.
For traders, the buyback will likely help fuel a rebound in shares in the coming months. The July $140 calls, last going for about $8.10, could deliver mid double-digit gains for a far lower cost than buying 100 shares outright.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.