Alphabet (GOOGL)(GOOG) just rolled out a $70 billion stock buyback, one of the largest in the market right now, but don’t assume this means the stock is about to soar. That kind of cash would make it the 142nd biggest company in the S&P 500 by itself. Still, Wall Street is cautious. The buyback is a defensive play, not a growth story.
Alphabet Raises Dividend but Focuses on the Buyback
Alongside the buyback, Alphabet bumped its dividend by 5% to 21 cents per share, nudging the yield up to 0.51%. That’s still peanuts compared to most dividend-paying stocks. The bulk of its capital return is clearly aimed at the buyback, not rewarding shareholders with income.
Markets responded with a mild nod. Shares ticked up 2.7% to $163.58, even as the S&P 500 (SPX) and Dow dipped. But this is hardly a victory lap. Alphabet stock is still down 23% from its February highs, weighed down by AI competition fears and broader economic uncertainty.
Buybacks work like this: when companies repurchase shares, they reduce the total number of shares outstanding, which boosts earnings per share and can support the stock price. But it only works if the market believes in the company’s fundamentals. This is why Rob Arnott at Research Affiliates says buying back stock when prices are low is “the smart thing to do.”
Why Buybacks Aren’t Always Enough
Take General Motors (GM) as an example. After struggling to convince investors its business was stable, GM bought back $22 billion worth of shares since 2023. That helped double its stock price. But there’s a catch—GM trades at just 4.3 times earnings for 2025. Alphabet, on the other hand, trades at 17 times earnings, which is cheaper than the S&P 500 average (21 times), but not bargain-bin cheap.
Compared to the rest of the Magnificent Seven, Alphabet looks like a deal. Tesla (TSLA) trades at a jaw-dropping 120 times earnings. But cheap doesn’t always mean poised for growth.
Analysts Keep Alphabet on a Short Leash
Despite the buyback, some analysts are still waving the caution flag. Katie Stockton of Fairlead Strategies told Barron’s that Alphabet has “lost long-term momentum” and expects shares to be either range-bound or even in a bear cycle this year. Her outlook is based on technical analysis, meaning she’s reading stock charts, not the company’s balance sheet.
Here’s why that matters: if Alphabet can break past $180, where investors tend to sell, it might change the game. But unless that happens, this $70 billion buyback might act more like a floor than a launchpad.
Is GOOGL Stock a Good Buy?
According to TipRanks, Alphabet earns a Moderate Buy consensus rating based on 27 Buys, 10 Holds, and zero Sell ratings assigned in the past three months. GOOGL’s average price target of $195.09 per share implies a 21% upside potential from current levels.
