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

By Douglas A. McIntyre Updated Apr 28, 2:57AM EDT · Published Aug 13, 4:18AM EDT

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Nvidia (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

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.