AMTD stock price went parabolic: Here’s why HKD could slip 20%

The AMTD Digital (HKD) stock price popped on Tuesday after the company announced a new share repurchase program. The shares jumped by more than 40% and reached a high of $8.50, the highest level since April this year. It then retreated and ended the day at $6.34.

AMTD Digital share repurchase

AMTD Idea is a Hong Kong-based financial, media, and marketing company that became popular after going public in 2022. At the time, the HKD and AMTD share prices jumped to their record highs of $2,537 and $25, respectively. At its peak, AMTD had a higher valuation than most American companies.

AMTD stock price jumped after the company announced that it will repurchase shares worth $30 million. Companies use share buybacks as a way of boosting their prices and earnings per share. They also repurchase their stocks as a way of expressing confidence in the business.

In a statement, AMTD said that the purchases will start soon and complete by December 29th. These purchases will either happen in the open market or in privately negotiated deals.

The most recent financial results showed that AMTD’s profit jumped to HK$83.7 million ($10.7 million) in the six months to December last year. Profits soared by more than 130% in the same period. Its revenue for the period was HK$109.3 million, up from the previous H$109.3 million. 

Its digital financial services commission was H$3.7 million while its digital solutions income rose to $100.7 million.

I am a bit skeptical about the share repurchases program by companies like AMTD. Recently, we have seen companies like Mullen Automotive and Deliveroo also repurchase their shares. Typically, the best strategy for share repurchases is using extra profits or free cash flow to do it.

AMTD stock price forecast

The 4H chart shows that the HKD stock price remained in a consolidation phase in the past few months. For a long time, the shares remained between the support at $6.46 and resistance at $7.10. It then made a bearish breakdown on August 14th and plunged to a low of $4.82.

AMTD stock price then bounced back as the management attempted to prop it up. This rebound saw it rise to $8.50. I suspect that the shares will likely resume the downward trend and retest the key support level at $5, which is ~20% below the current level.