Silicon Valley stocks with buybacks are getting a lot of attention from investors in 2024. That’s because companies that consistently repurchase their own shares signal strong confidence in their future growth prospects. As a result, stocks with substantial buyback programs often outperform the broader market.
By reducing the number of outstanding shares, buybacks directly increase earnings per share. A higher EPS generally leads to higher valuation multiples and stock prices over time. Companies essentially invest in themselves through buybacks when they believe they have undervalued shares. In turn, this rewards long-term shareholders as the ownership stake and future earnings power grow on a per-share basis.
In 2024, several Silicon Valley technology giants have authorized expansive new buyback programs worth billions. Given their strong free-cash-flow generation and balance-sheet capacity, these innovative companies are in a good position to continue these shareholder-friendly buybacks for years to come.
Apple (AAPL)
Apple (NASDAQ:AAPL) remains the undisputed leader when it comes to Silicon Valley stocks with buybacks. The company just wrapped up another massive $83.9 billion in buybacks for 2023, building on the incredible $658 billion spent over the last decade repurchasing shares. In the last quarter of 2023 alone, Apple spent $22.7 billion on buybacks.
This enormous capital return program has delivered tremendous value to shareholders. While Apple’s revenue has grown at a healthy 6.5% CAGR since 2015, EPS growth has averaged around 13% over that stretch thanks largely to buybacks. With the stock consistently trading around 25x earnings, Apple has been able to reduce its outstanding share count by about 3-3.5% annually.
Going forward, Apple’s EPS is expected to continue growing at a high single-digit pace. And with strong free cash flow generation funding future buybacks, investors can expect at least 200 basis points of EPS growth per year over the next 5-10 years to come directly from capital returns. For a mega-cap tech leader producing the immense cash flows that Apple does, buybacks remain a shareholder-friendly avenue to drive growth.
Alphabet (GOOGL)
Alphabet (NASDAQ:GOOGL,NASDAQ:GOOG), the tech giant behind Google and YouTube, is one of the top Silicon Valley stocks with buybacks. Over the past 10 years, Alphabet has repurchased a massive $240 billion worth of its own shares. In 2023 alone, the company spent $62.2 billion on buybacks, slightly higher than the $59.3 billion spent in 2022.
Importantly, Alphabet’s share repurchase program has no expiration date. The company is authorized to buy back up to another $36.3 billion in shares in 2024 and beyond. With strong free cash flows nearing $70 billion a year, Alphabet has plenty of dry powder to continue repurchases.
Reducing shares outstanding through buybacks boosts Alphabet’s already impressive earnings per share growth. Over the past 5 years, net income has increased approximately 140% while EPS has grown 165%. If Alphabet maintains its buyback pace, EPS could grow over 150% in the next decade. With dominant positions in online search and video, Alphabet has an incredibly profitable underlying business throwing off cash to fund buybacks. The company’s operating margins stand at 25.49%. Alphabet stock is viewed as undervalued today for one of the quality Silicon Valley stocks with buybacks set to drive EPS higher.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) joins Apple and Alphabet as one of the Silicon Valley stocks with buybacks planned for 2024. The company has spent $146 billion on share repurchases over the past decade, signaling strong confidence in its future growth. In 2023 alone, Meta spent $20.03 billion on buybacks.
As of Dec. 31st, 2023, Meta had $30.93 billion authorized for additional repurchases. It also announced a $50 billion increase in its share repurchase program, equal to about 5% of its shares outstanding with its current $1 trillion market capitalization.
Meta’s massive buybacks reward shareholders and reflect its evolution into a finance-focused tech giant resembling Apple. Combined with better-than-expected earnings, Meta’s latest buyback announcement prompted the largest one-day jump in market value for any stock, making Meta a trillion-dollar company again. With efficiency driving improved profitability and over $80 billion now authorized for capital return, Meta’s buybacks will boost EPS growth for years. As one of the true Silicon Valley stocks with buybacks, Meta will likely soar in 2024.
On the date of publication, Andrea van Schalkwyk held long positions in AAPL and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
