For The First Time In 10 Years, Amazon Quietly Repurchased Over $1 Billion In Stock As The Price Tumbled

There reason why Amazon stock is surging today – and after the close yesterday – may not be entirely due to the company’s earnings, which despite the solid AWC performance and Prime membership hike, were actually rather soggy: the company itself is aggressively repurchasing its own stock (not long after Jeff Bezos was selling his).

While Amazon did not mention it anywhere in its earnings release, in the AMZN 10-K filed this morning, the company disclosed that it had repurchased half a million shares of common stock for $1.3bn between January 1 and February 2. It probably also repurchased (a lot) more after the close on Feb 3, when the stock price exploded 18% higher in very thin volumes, effectively repricing the stock entirely after Facebook’s implosion earlier in the day, but we’d be guessing.

Why is this important? Because as Morgan Stanley strategist Brian Nowak writes, “while more symbolic than material, we think it is a positive signal. Our work shows AMZN has timed past buybacks well too (averaging a theoretical 100% average 12 month return).“

According to Nowak, it’s been 10 years since AMZN repurchased any common stock – the last time it did so was Q1 2012 – and AMZN still has ~$5 billion of repurchases authorized from its February 2016 authorization.

The Morgan Stanley strategist then goes on to note that Amazon has only repurchased shares 5 quarters of its company history– 1Q:12, 4Q:11, 4Q:08, 1Q:07, and 3Q:06, and – more importantly –  historically AMZN’s repurchases “have been positive signals about the equity value, as they would have earned an average return of 42% over a 6 month return period.” Similarly, the average 12- and 24- month returns on Amazon’s share repurchases (assuming they bought and held the stock) would have been 100% and 135%, respectively.

While Nowak concludes that he remains bullish the (buy-rated) AMZN for many fundamental reasons, and does not expect for AMZN to materially shrink its float in the near-term, he does note that “as big tech (GOOGL/FB/AAPL/MSFT) become more shareholder friendly (buybacks, disclosure, etc) we are happy to see AMZN participate (new ad disclosure last night, better color on capex and now repurchases).“