So how do share buybacks actually impact a company's stock price? 📊

Let's look at a real example:

On February 1st 2024, Meta (Facebook) announced a $50 billion stock buyback 👀

After the announcement, Meta's stock price jumped 20% in a single day! 📈

Here's why buybacks can boost share prices in the short term:

Buyback announcements signal that the company thinks its stock is undervalued.

After all, instead of all the other things the company could do with its cash, it’s spending it on its own stock!

This vote of confidence from management can spur investor demand, driving up the price 💪

Over the long term, buybacks reduce the supply of shares on the market.

Basic economics says that if demand stays constant but supply goes down, prices should rise 📉

Think of it like this: If there are fewer shares of Meta available to buy but just as many people wanting to buy them, investors may be willing to pay higher prices to own a piece of the company 💡

Additionally, by reducing the share count, buybacks increase key metrics like EPS, even with flat profits.

A higher EPS can make the stock look more attractive to investors 🤑

However, buybacks aren't guaranteed to boost share prices, especially if a company overpays for its stock or if business fundamentals deteriorate 🚨

In addition, it can be a red flag if a company is engaging in too many share buybacks instead of investing in research or development or growing its business 🚩