Publicly traded corporations return money to their shareholders in two main ways: regular dividends and stock buybacks. It is clear why investors love dividends, because they get cash sent to them or, if the company has a dividend reinvestment plan, they can buy more shares of the stock, sometimes at a discount.
When corporations buy back their own stock, that serves investors as it puts a bid under the shares, as buybacks usually are large and take days, weeks or months to complete. In some cases, corporations park the shares for bonus time and other uses, effectively taking them out of the float.
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Goldman Sachs analysts track corporate buybacks, and in a new research report they revealed the stocks in the firm’s “buyback baskets,” which are constructed by sector. We were intrigued by the five companies in the information technology (IT) basket that bought back the highest percentage of their own shares over the past 12 months. The analysts noted this when discussing these buybacks:
Second quarter earnings season reaffirmed our view that corporations are a key source of demand for US equities. Repurchases totaled more than $200 billion in the second quarter and buyback announcements through July equaled $683 billion. Previously-announced deals should drive nearly $250 billion of cash mergers and acquisitions spending in the second half of 2021, joining a potential $460 billion of buybacks if the recent pace continues. This demand should easily outweigh equity supply from IPOs, follow ons, SPACs, and convertibles as well as potential selling from upcoming IPO lock-up expiries.
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We screened the five IT stocks buying back among the most stock to see which Wall Street firms had Buy-equivalent ratings, and they are listed in order of the biggest buyback percentage. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
HP
This legacy Silicon Valley pioneer has purchased 24% of its own stock over the past 12 months. HP Inc. (NYSE: HPQ | HPQ Price Prediction) provides personal computing and other access devices, imaging and printing products and related technologies, solutions and services in the United States and internationally.
HP serves individual consumers, small and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. The company operates through three segments.
The Personal Systems segment offers commercial and consumer desktop and notebook personal computers, workstations, thin clients, commercial mobility devices, retail point-of-sale systems, displays and other related accessories, software, support and services. The Printing segment provides consumer and commercial printer hardware, supplies, solutions and services, as well as scanning devices. And the Corporate Investments segment includes HP Labs and business incubation projects.
Shareholders receive a 2.63% dividend. Morgan Stanley has a $40 price target on HP stock. The consensus target of $33.04 is much closer to Monday’s close at $29.44 per share.
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Seagate
This disk drive giant is hitting on all cylinders and looks reasonable at current trading levels after buying back 17% of its own shares over the past year. Seagate Technology Holdings PLC (NASDAQ: STX) provides data storage technology and solutions in Singapore, the United States, the Netherlands and elsewhere.
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The company offers hard disk and solid state drives, including serial advanced technology attachment, serial attached SCSI and non-volatile memory express products; solid state hybrid drives; and storage subsystems. Its products are used in enterprise servers and storage systems and edge compute and non-compute applications.
Seagate also provides an enterprise data solutions portfolio, comprising storage subsystems and mass capacity optimized private cloud storage solutions for enterprises, cloud service providers and scale-out storage servers and original equipment manufacturers. In addition, it offers external storage solutions under the Seagate Backup Plus and Expansion product lines, as well as under the LaCie and Maxtor brands in capacities up to 16TB.
Shareholders enjoy a 2.95% dividend. Morgan Stanley lifted its $114 price target to $118 after the company posted sparkling quarterly earnings. The consensus target is just $102.90, and Seagate Technology stock closed most recently at $90.71.
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Oracle
This is another venerable tech giant, and it has bought back 13% of its shares in the past 52 weeks. Oracle Corp. (NYSE: ORCL) provides products and services that address enterprise IT environments worldwide. Its Oracle cloud software as a service offering includes various cloud software applications, including Oracle Fusion cloud enterprise resource planning, Oracle Fusion cloud enterprise performance management, Oracle Fusion cloud supply chain and manufacturing management, Oracle Fusion cloud human capital management, Oracle Fusion cloud advertising and customer experience and NetSuite applications suite.
The company also offers cloud-based industry solutions for various industries, Oracle application licenses and Oracle license support services. In addition, it provides cloud and license business infrastructure technologies, such as the Oracle Database, an enterprise database; Java, a software development language; and middleware, including development tools and others.
The company’s cloud and license business’ infrastructure technologies also comprise cloud-based compute, storage and networking capabilities through its Oracle cloud infrastructure as a service offerings. Further, it offers infrastructure offerings comprising Oracle autonomous data warehouse cloud service, Oracle autonomous transaction processing cloud service, Internet of Things, digital assistant and blockchain.
Additionally, Oracle provides hardware products and other hardware-related software offerings, including Oracle engineered systems, enterprise servers, storage solutions, industry-specific hardware, virtualization software, operating systems, management software and related hardware services, as well as consulting services. The company markets and sells its cloud, license, hardware, support and services offerings directly to businesses in various industries, government agencies, and educational institutions, as well as through indirect channels.
Shareholders receive a 1.41% dividend. The $100 KeyCorp price target is well above the $79.49 consensus target. Monday’s closing print was $90.82.
Qorvo
This company was formed after the merger of RF Micro Devices and Triquint Semiconductor back in 2015, and it has purchased 6% of the outstanding shares over the past year. Qorvo Inc. (NASDAQ: QRVO) is a leading provider of core technologies and RF solutions for mobile, infrastructure and aerospace/defense applications. Qorvo has more than 7,000 global employees dedicated to delivering solutions for everything that connects the world.
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Qorvo exceeded investor expectations last year, as the company managed to grow revenue 18% based on fourth-quarter calendar company guidance, despite a double-digit percentage decline in global smartphone units and the geopolitical headwinds.
Top analysts feel that the positive content trajectory across mobile and its Infrastructure and Defense Products segments will drive robust revenue growth. Improving mix, continued capital discipline and execution on its ongoing cost down initiatives supports gross margin expansion and higher free-cash-flow margin, and in turn, balance sheet optionality.
Oppenheimer has set a $250 price target. The consensus target is only $208.16, and Qorvo stock closed at $187.57 on Monday.
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Lam Research
This remains a top chip equipment pick across Wall Street, and it has purchased 6% of the outstanding shares over the past year. Lam Research Corp. (NASDAQ: LRCX) designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits worldwide.
The company offers ALTUS systems to deposit conformal films for tungsten metallization applications, SABRE electrochemical deposition products for copper damascene manufacturing, SOLA ultraviolet thermal processing products for film treatments and VECTOR plasma-enhanced chemical vapor deposition atomic layer deposition products.
It also provides SPEED gapfill high-density plasma chemical vapor deposition products and Striker single-wafer atomic layer deposition products that provide multiple dielectric film solutions. In addition, the company offers Flex for dielectric etch applications, Kiyo for conductor etch applications, Syndion for through-silicon via etch applications and Versys metal products for metal etch processes.
Lam Research’s Coronus bevel clean products enhance die yield. Its Da Vinci, DV-Prime, EOS and SP address a range of wafer cleaning applications, and Metryx mass metrology systems offer high precision in-line mass measurement in semiconductor wafer manufacturing.
Investors receive just a 0.88% dividend. The $790 Wall Street high price target comes from Stifel. The consensus target is $592.43, and Lam Research stock ended trading on Monday at $588.87 a share.
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These five tech stocks have had an awesome 2021 and look poised to trade much higher. Given that the market is extremely overbought, and we are entering the seasonally weak time of the year for equities, it may make sense to scale purchase shares over a 90-day or longer period.
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