Guess which ASX 200 stock just extended its $580 million buyback

Could this draw investor attention to the stock?

| More on:

Should you invest $1,000 in Silver Lake Resources right now?

Before you buy Silver Lake Resources shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Silver Lake Resources wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

a woman wearing fashionable clothes and jewellery checks her phone with a satisfied smile on her face in a luxurous home setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX 200 stock Harvey Norman Holdings Ltd (ASX: HVN) has just extended its on-market share buyback.

Initially set to conclude on 12 November 2024, the buyback period now spans a far longer period, pending market conditions, from 22 November this year to 21 November 2025.

But there "ain't no sunshine" for Harvey Norman shares at present, as Bill Withers would have sung. Brokers are turning bearish alongside investors.

Will the buyback spur some interest? Let's take a look.

Created with Highcharts 11.4.3Harvey Norman PriceZoom1M3M6MYTD1Y5Y10YALL1 Nov 20237 Nov 2024Zoom ▾Nov '23Jan '24Mar '24May '24Jul '24Sep '24Nov '24Jan '24Jan '24Apr '24Apr '24Jul '24Jul '24Oct '24Oct '24www.fool.com.au

Why extend the buyback?

ASX 200 stocks routinely buy back their own shares when they have surplus cash that cannot be redeployed back into the business.

This can arise from a good business period or when cash piles begin to build up over time, with no meaningful use for it in the business's growth. The decision of buyback versus dividends hinges on tax considerations, with the latter creating a tax burden for shareholders.

This is known as 'capital management', where capital is all the cash destined for investment (and not operating expenses).

The Harvey Norman board views the buyback as a strategic move for capital management, especially considering "recent share price history".

The buyback will be conducted in the ordinary course of trading over the buyback period. The final amount of the buyback and the exact timing of any trades made from time to time will depend on a number of factors, including market conditions, the Company's prevailing share price, and any unforeseen circumstances that may arise during the buyback period.

The Company will only buyback shares at such times and in such circumstances as it considers beneficial to the efficient capital management of the Company and gives no assurance that the Company will buyback any or all of the 124,600,665 shares contemplated.

The Company reserves the right to suspend or terminate the buyback at any time.

At the ASX 200 stock's closing price on Thursday, which settled at $4.52, the estimated cash outlay for the buyback could reach around $580 million.

However, the company cannot guarantee that it will repurchase the entire 124.6 million shares planned, nor can it rule out pausing or terminating the buyback if needed.

Broker ratings on ASX 200 stock mixed

Following the ASX 200 stock's recent downsides, brokers have started to take notice. Goldman Sachs downgraded Harvey Norman shares from hold to sell today, citing concerns over potential market share loss.

The broker revised its price target to $4 on the stock alongside its lowered rating.

It said key competitors were gaining ground in electronics and tech, traditionally strong areas for Harvey Norman, making it a tough environment for growth.

Goldman's FY25 forecast for Harvey Norman now anticipates sales of $4.13 billion and pre-tax earnings of $628 million.

Despite this, consensus estimates point to a period of growth for the company these next two years.

According to CommSec, the median analyst estimate projects earnings growth of 17% per year over the next two years, hitting 39 cents per share.

Meanwhile it projects dividends of 31 cents per share by FYY26, a growth rate of 18% per year until then.

Foolish takeaway

As Harvey Norman extends its $580 million share buyback, investors might see this as a positive signal of the board's confidence in the ASX 200 stock's long-term value.

Whether this will eventuate depends on more than just a stock buyback, though. While buybacks increase ownership in a company without any additional investment, they do not suggest a fundamental improvement in the company, such as a period of earnings growth would.

In that regard, analysts expect Harvey Norman to grow earnings and dividends over the coming two years, which is a highly positive sign.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Harvey Norman. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retail Shares

Girl with make up and jewellery posing.
Retail Shares

Buying the dip: $5,000 invested in Lovisa shares a month ago is now worth…

It's been an outstanding first month for new Lovisa shareholders.

Read more »

Woman checking out new iPads.
Retail Shares

JB Hi-Fi share price sinks on sales growth figures

JB Hi-Fi shares are under pressure on Wednesday. But why?

Read more »

a close up of a motorcycle's front wheel and body on the open road with another motorcycle rider in the background cruising behind the leading driver.
Retail Shares

Up 100% in 11 months, can this small-cap ASX stock keep flying higher?

This business has delivered huge returns. Is it still a buy?

Read more »

A happy woman peaks out from under her bed sheets
Retail Shares

Interest rate cut beneficiaries: Should I buy Adairs or Temple & Webster shares?

These two ASX stocks should benefit from rate cuts.

Read more »

A warehouse worker is standing next to a shelf and using a digital tablet.
Retail Shares

3 reasons why the Wesfarmers share price could still be a buy

Wesfarmers is a wonderful business for a few reasons.

Read more »

A senior pharmacist talks to a customer at the counter in a shop.
Share Market News

Where are Australian consumers spending their money in this environment?

Macquarie research reveals new spending trends and the best ASX 200 retail stocks to buy now.

Read more »

Young couple at the counter of a hardware store.
Retail Shares

Interest rates down and renos up: 2 ASX stocks to benefit

These businesses have a lot going for them.

Read more »

A blonde woman shows off her ring to two excited friends with Michael Hill Jeweller among the top ASX retail shares of FY22
Retail Shares

Lovisa shares: The bull and bear cases

Let's explore the pros and cons of this popular ASX retailer.

Read more »