Ibotta Stock: Why the Buyback Looks Like a Bullish Bet
There is a hidden way that companies can reward shareholders, and no, it’s not dividends. This method actually works much better. Dividends create a double-taxation event, where a company pays taxes on the operating cash flow earned during a certain period and then pays dividends with this after-tax capital, only for investors to pay a second round of tax on this income later on.
More than being a double-taxation event, dividends naturally strip a certain amount of cash out of business, capital that might have been used in other more productive and accretive ventures.
The alternative to paying dividends is something not a lot of investors pay attention to, which is engaging in stock buybacks, where this capital is not only saved from double-taxation but also reinvested into the company for further potential growth down the line.
In today’s round of stock buybacks, one company definitely stands out, considering that it just had its initial public offering (IPO) just under a year ago. Shares of Ibotta Inc. (NYSE: IBTA) have not been the hottest since the onset of 2025.
Still, there may be reasons why management now thinks this stock could be nearing its bottom, betting that the valuations should be higher from where they are today.
A Tailored Solution for Today’s Consumer
Now that consumer confidence and spending readings in the United States economy have cooled off, platforms like DoorDash Inc. (NASDAQ: DASH) began offering installment payments on ordered food and groceries, a testament to the struggles of everyday consumers in today’s inflation-ridden economy.
This might have been the plan for Ibotta as they launched into public markets as a platform dedicated to bringing discounts and offers on consumer discretionary names, aiding the bottlenecks in pricing issues that abound today. However, the timing of the IPO coincided with the recent breakout in volatility from the broader S&P 500.
As a new issue in the stock market, the lack of historical price data and track record makes Ibotta a prime target for sellers when times get rough in the broader market. For this reason, the stock is now down by over 32% on a year-to-date basis, but that doesn’t mean the company's underlying realities are also down by as much.
Financial Performance Created Confidence for Ibotta Management
As of the latest quarterly earnings presentation, investors can note that Ibotta delivered up to $367.3 million in net revenue, which translates to a net annual growth rate of as much as 20%. In addition to this double-digit revenue growth rate, the company boasts a 3% boost in gross margins, and that is due to a couple of positive factors.
First, being a software company allows for naturally high margins due to low operating costs, which enabled Ibotta to report up to 85% in gross margins. Second, Ibotta’s growth is tied to the growth of other industry-leading names in the delivery and digital offers space.
By being accepted into platforms like Instacart and DoorDash, any growth in user bases for those names directly translates into fees and commission growth for Ibotta as well. Because of this massive tailwind at its back and the low prices it trades under today, insiders saw enough reason to buy their own stock.
As of the past quarter, the company engaged in a stock buyback program of up to 200 thousand shares in the open market, translating to a transaction of up to $15.6 million, or nearly 1.1% of the company’s market capitalization today.
The view for buybacks is simple; it implies that insiders think the company is cheap enough to buy at these levels. They also reiterate their views that higher prices could be here in the coming months or quarters. However bullish this may seem, other factors can push this optimistic view even further.
A way to gauge the market’s interest in this company can be achieved outside of price action: through valuation multiples compared to the rest of the peer group. This is where Ibotta’s price-to-earnings (P/E) ratio comes into play. Trading at as much as 24.4x today would command a steep premium to the rest of the services sector’s 12.2x average valuation.
Considering this premium, investors must have a justifiable reason to be willing to overpay for this stock. Perhaps the tailwinds now present in this company’s business model command the premium it trades under, not to mention its role in facilitating the tightening consumer budgets that need discounts on items such as the ones offered by Ibotta.
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