What Happened This Week: Poor Earnings Reports And Buybacks

  • Stock Market Analysis

Is it a trend? A sign of the times? Or both?

What I am referring to are share buybacks.

Talk on Wall Street this week included a whole lot of conversations about share buybacks. They are a great way to keep investors interested in times when earnings fail to meet expectations or past performances, and that is certainly what is happening now. Buybacks also serve to dominate the takeaways on earnings calls that make headlines. And in this bearish market, that is the sort of stuff that more and more companies seem to be reaching for.

Kicking off the chatter on buybacks this past week, of course, was Tesla (NASDAQ: TSLA ) CEO Elon Musk.

Musk floated the idea of introducing a Tesla share buyback program valued between $5 billion and $10 billion during an earnings call following Tesla’s third-quarter report on Oct. 19, according to reports.

This mention did not come out of the blue. Tesla has not put in a stellar performance in the first half of the year, and its stock has dropped about 16% so far this month. It closed yesterday at $214.59, up 3.45% on the day.

Tesla Weekly Chart

Source: Investing.com

And given the reasons for Tesla’s lackluster performance – supply-chain delays and a weakening demand for new cars – the likelihood of this downward trajectory for its stock will continue. But a buyback program changes the dynamic somewhat, increasing shareholder value and keeping investors from abandoning ship.

But keep in mind: The one thing that Musk did not mention when he talked about buybacks was a timeline. All he said, according to media reports, was: “We debated the buyback idea extensively at board level. The board generally thinks that it makes sense to do a buyback. We want to work through the right process to do a buyback.”

Tesla reported a third-quarter net profit of $3.3 billion on revenues of $21.45 billion.

Snap Shares Not Snapping Back

Snap (NYSE: SNAP ) shareholders are another group that has been offered a buyback. But this is not the first time.

The social media company reported second-quarter earnings this week that failed to impress, nor met analysts’ expectations. Revenues came in at $1.11 billion, short of the $1.14 billion anticipated.

The board, as it did at the end of the second quarter, authorized a stock buyback program with a limit of $500 million. But will it do the trick?

Since its last earnings report earlier this summer, the company’s shares have shed about 30% of their value.

We’ll see where the valuation goes from here.

Yesterday, Snap stock took a beating, losing another 28% on the day to close at $7.75. That’s rivalling the lowest point it hit back in 2019.

Snap Weekly Chart

Source: Investing.com

Tech Companies At Top Of Buyback Charts

Tech companies have been at the top of the leader boards when it comes to the size of buyback programs being offered in 2022, with Apple (NASDAQ: AAPL ), Alphabet (NASDAQ: GOOGL ), Microsoft (NASDAQ: MSFT ) and Meta (NASDAQ: META ) leading the pack, according to Verity data.

Apple offered a $21.7-billion buyback program in the second quarter of 2022, representing just under 1% of its outstanding shares. Alphabet issued a $15.8-billion offer, which set a company record. Meanwhile, Microsoft put forward a $7.8-billion package in Q2, which matched its offer in the previous quarter. Meta bought back $5.1 billion in the second quarter.

With many of the tech companies set to report in the coming week, we might see a clearer path for this trend. One last fun fact: tech companies represent about 25% of the overall market.

Lockheed Gets In On The Act

But, of course, buybacks are not just for tech companies.

When Lockheed Martin (NYSE: LMT ) announced its earnings last week – which were quite spectacular – the company announced it would increase its buyback plan to $14 billion and expects to move on a $4-billion accelerated share repurchase program in the four quarter..

Lockheed shares jumped just over 8.5% on the earnings report at the beginning of the week and climbed steadily since, closing Friday at $454, a gain of about 14% on the week overall.

Lockheed Martin Weekly Chart

Source: Investing.com

Top Winners And Losers Of The Week

Again, for all those out there who are keeping score, here are the top gainers of the past week:

On the S&P 500

  • Netflix (NASDAQ: NFLX ): +25.94%
  • Schlumberger (NYSE: SLB ): +19.52%
  • Intuitive Surgical (NASDAQ: ISRG ): +19.38%
  • Lam Research (NASDAQ: LRCX ): +17.32%
  • Lockheed Martin (NYSE: LMT ): +16.76%

On the NASDAQ Composite

  • Mullen Automotive (NASDAQ: MULN ): +62.67%
  • Acorda Therapeutics (NASDAQ: ACOR ): 53.59%
  • AVEO Pharmaceuticals (NASDAQ: AVEO ): +47.31%
  • Aehr Test Systems (NASDAQ: AEHR ): +40.96%
  • Clean Energy Fuels (NASDAQ: CLNE ): +36.14%

And the biggest losers:

On the S&P 500

  • SVB Financial Group (NASDAQ: SIVB ): -27.61%
  • Generac Holdings (NYSE: GNRC ): -19.96%
  • M&T Bank Corp (NYSE: MTB ): -12.84%
  • Robert Half International (NYSE: RHI ): -9.88%
  • Comerica (NYSE: CMA ): -9.39%

On the NASDAQ Composite

  • National CineMedia Inc (NASDAQ: NCMI ): -30.81%
  • SVB Financial Group (NASDAQ: SIVB ): -27.61%
  • Alpine Immune Sciences (NASDAQ: ALPN ): -19.15%
  • Stabilis Solutions Inc (NASDAQ: SLNG ): -18.95%
  • Neptune Wellness Solutions (NASDAQ: NEPT ): -16.9%

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