Facebook's $6 Billion Buyback Is 'Pragmatic'

On November 18, Facebook Inc FB had announced the authorization of a share buyback program worth $6 billion, starting in Q1:17.

Nomura’s Anthony DiClemente maintains a Buy rating on the company, with a price target of $155.

Buyback Authorization

The analyst pointed out that the buyback authorization comes at a time when the stock valuation multiples are close to record lows.

With the stock trading close to its three-year lows, the timing of the buyback program appears to be “encouragingly pragmatic,” DiClemente stated.

“While recent headlines have weighed on the FB narrative, we believe the planned buyback should bolster investor confidence that Facebook is taking a disciplined approach to capital allocation,” the analyst mentioned.

Easing Investor Concerns

Although some are likely to view this repurchase authorization as a defensive move, given the potential slowing of the company’s growth, DiClemente believes the announcement could help to ease some of the investor concerns, especially those associated with spending and capital allocation.

This is especially true following the recent more than 10 percent selloff in the stock.

The EPS estimate for FY 2017 has been raised from $5.23 to $5.27, following the announcement of the buyback program.