Wal-Mart’s $20 Billion Stock Buyback Bonanza

Wal-Mart (NYSE: WMT) announced yesterday up to $20 billion in stock buybacks.

CNBC, The Wall Street Journal, The Financial Times and others debate this morning whether Wal-Mart could’ve done something “smarter” with their $20 billion.

Markets applauded the move and Wal-Mart shares closed yesterday up 4.47%.

Wal-Mart stock over the last month:

Walmart stock chart

This is great news if you hold Wal-Mart, but should you buy it if you don’t own it?

A CNBC article yesterday evening pointed out that huge stock buybacks are a great way for companies to boost earnings.

But the downside is, it’s also a great way to paper over a faltering business.

For example, CNBC asks flat out if that $20 billion would’ve been better spent “taking on Amazon.”

Business Insider called the buyback, “the oldest trick in the book.”

But here’s the thing…

Reuters reports Wal-Mart’s forecasting 40% online sales growth next year.

You may have also come across news recently of Wal-Mart’s new “30-second returns” program that made headlines earlier this week.

You can’t return an Amazon item in 30 seconds.

Plus, Wal-Mart spent $3.3 billion on Jet.com last year to get stronger in e-commerce and recently purchased a startup called Parcel to improve delivery speed.

Now, when you see Wal-Mart and e-commerce in the same sentence, you also see terms like “urban millennials.”

The takeaway is, yes, a $20 billion stock buyback might be a lazy way to boost earnings.

But don’t sleep on Wal-Mart. They have footprint in every corner of America. And they can cause problems for Amazon beyond fast delivery and quick returns.

They can, simply put, compete on price with Amazon. No other company has that power.

The Amazon / Wal-Mart fight is one to watch for the year ahead.

In other market news, the 800-lb gorilla of processors, Nvidia (NASDAQ: NVDA) jumped $3.54 or 1.91% yesterday on news the company has a new computer that can assist driverless technology.

MarketWatch went so far as to call Nvidia the “new leader in autonomous-driving technology.”

NVDA shares over the last month:

NVDA stock chart

Jim Cramer said Nvidia’s new technology, “is going to change everything.”

Has NVDA reached “euphoria” stage? Time will tell. From driverless to virtual reality to crypto mining. If it’s a hot story, NVDA has an angle on it.

Taking a look at the markets this morning…

Market Rundown for Wed., October 11

Do you think mainstream financial news outlets have a boilerplate “new all-time highs” story they just polish up a few times a week?

Everything goes higher every day.

How long can that last?

S&P 500 futures are off 3.25 at writing this morning at 2,545.

Oil’s up a few ticks at $51.26. An ounce of gold goes for $1,292.

Talk with you again on Friday.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler

Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown and has been with Agora Financial / Seven Figure Publishing since 2005. He's been covering technology and markets for over a decade.

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