The stock market tailwind Goldman sees growing to $1 trillion in 2025 and how to play it

Published Thu, Mar 7 20243:45 PM EST

S & P 500 share repurchases could make a comeback in 2024 with the help of the Magnificent 7, according to Goldman Sachs. The firm estimates S & P 500 constituents will repurchase their shares to the tune of $925 billion this year, which represents a 13% year-over-year rise. This trend is forecasted to rise another 16% in 2025 to more than $1 trillion in 2025. This comes after S & P 500 buybacks fell 14% in 2023 due to little earnings growth, high cost of capital and macro concerns, according to a Wednesday note from Goldman strategists David Kostin and Cormac Conners. When companies purchase their own stock, it reduces the overall number of shares in the market. This creates more value for existing shareholders by effectively increasing the earnings per share. Buybacks could rise this year as mega-cap tech companies post better-than-expected earnings. The Magnificent 7 – which include Alphabet , Amazon , Apple, Meta Platforms , Microsoft , Nvidia and Tesla – accounted for 26% of S & P 500 repurchases in 2023. With the exception of Amazon and Tesla, these companies bought back their shares in the fourth quarter, Goldman found. Buybacks may also boost the companies' stocks. "Investors have rewarded companies for engaging in share buybacks more than other uses of cash in recent months," the firm found. Indeed, Goldman's buyback basket outperformed the S & P 500 by 4 percentage points since the start of the 2023 fourth quarter. See below for some of the names in Goldman's share repurchase basket, and where analysts forecast them going next. Meta was a new addition to Goldman's buybacks basket last fall. The company recently expanded its share buyback program by $50 billion. As of Dec. 31, 2023, Meta had $30.93 billion of authorized shares available for repurchase. The stock has surged nearly 45% year to date. In all, 53 out of 62 analysts covering the shares rate it a buy, per LSEG. However, the consensus price target implies that shares could slip about 1% from current levels. META YTD mountain Meta Platforms in 2024 Another Magnificent 7 member on the list is Apple . During its fiscal first quarter, the company said it spent close to $27 billion on dividends and share repurchases. Though shares of the iPhone maker are off by 12% in 2024, the majority of analysts remain upbeat on the stock. Nearly two-thirds of the analysts covering Apple rate it a buy or strong buy, according to LSEG, and the average price target suggests upside of 18% from here. Oil companies Marathon Oil and Marathon Petroleum are some of Goldman's other buyback picks. Marathon Petroleum authorized $5 billion in share repurchases last October, expanding from its previous authorization, which still had $4.3 billion remaining as of the end of September. Shares of the energy company are up 20% in 2024. However, analysts' price targets suggest the stock could fall about 2% from here, per LSEG. Meanwhile, Marathon Oil has underperformed the broader market this year, rising only 2.2% against the S & P 500's gains of more than 8%. The company repurchased more than $1 billion of its shares in 2023. MPC MRO YTD mountain Marathon Petroleum and Marathon Oil in 2024