Investing

Nvidia (NVDA): The Buy-Back Makes A Comeback

PcNvidia (NASDAQ:NVDA) defiled itself with earnings which should undercut investor faith in the company for many quarters to come. The graphics chip firm took a charge of nearly $200 million for releasing a faulty chip. It posted a loss of $120 million and revenue dropped slightly. Nvidia also says it underestimated competition from rival AMD (AMD), one of the worst run technical companies on the planet.

As a nifty way to offset all of that bad news, Nvidia said it would buy-back $1 billion of its shares. That spiked the stock price up 10% after hours. It still trades near its 52-week low, but under normal circumstances a bad quarter would have knocked the stock down.

Since Nvidia has a market cap of only $6 billion, it is taking a lot of its shares out of circulation, which should, in turn, improve EPS.

The rise in NVDA shares is a sign of how desperate the market is to find some scintilla of good news in a sea of disastrous earnings. That could bring share buy-backs back into vogue.

It may be a cheap trick, but it looks like it works.

Douglas A. McIntyre

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