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Megacap Stocks Primed For Buyback Boost

Rising free cash flow could fuel more buybacks, analysts say

Companies with buybacks have outperformed other Nasdaq stocks

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Bloomberg Chart on Megacap stocks

Bulls hoping the Nasdaq 100’s best day since August is the start of a meaningful rebound may be about to get a boost from a long-standing ally: tech companies themselves.

Led by the likes of Apple Inc. and Microsoft Corp., Big Tech has for years been among the most extravagant spenders on their own stock, often to reduce dilution as new shares issued for compensation hit the market.

The six biggest tech firms that repurchase shares have more than $250 billion set to deploy, from existing programs or ones authorized this year, according to data compiled by Bloomberg.

But a big chunk of that went unused, as the pace of buybacks slowed in the first half and likely stayed sluggish during the third quarter market rout, according to a recent note from Bank of America Securities.

Now, the setup heading into the final three months of the year and the start of 2024 looks promising after cost-cutting and growing revenue have left many tech companies flush with cash to deploy.

Free Cash Flow on the Rise in the S&P 500

Tech-related sectors saw free cash flow higher in the second quarter of 2023 than the same quarter a year ago

That would be a welcome development for tech bulls who’ve watched the Nasdaq 100 shed $1 trillion in market value in the last month.


Image: Tech stocks