NEW YORK : Nvidia's move to buy back $25 billion of its shares after its stock has more than tripled this year caught some investors off-guard, even as they cheered a stellar second-quarter report. Shares of Nvidia touched a record high on Thursday, a day after the company blew past expectations with its
NEW YORK : Nvidia's move to buy back $25 billion of its shares after its stock has more than tripled this year caught some investors off-guard, even as they cheered a stellar second-quarter report.
Companies commonly repurchase their stock as a way to return capital to shareholders. Such buybacks can benefit a stock's price by reducing the supply of shares and increasing demand, and can boost earnings per share, a closely watched investor metric. "As a shareholder, we like to see stock buybacks, but for a company like Nvidia that is growing so fast, you kind of want to see their earnings being plowed back in to the company,” Lip added.
"Historically, you'd love it when a company is able to buy their stock back when it is depressed, but I don't think anybody can make the case that it is at a depressed place right now," said Tom Plumb, CEO and lead portfolio manager at Plumb Funds, which has Nvidia as one of its largest holdings. Nvidia spent about 27 per cent of revenue on research and development last year, in line with rival chip companies.In its second-quarter earnings release on Wednesday, Nvidia said its board approved $25 billion in additional share repurchases"without expiration," and that the company plans to continue repurchases this fiscal year.
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