alt Hacker NewsI see it as a Ponzi scheme when people argue that they're a replacement for dividends. You're describing them as if dividends are an assumption, in which case they're perfectly reasonable.
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I don't think buybacks are really the thing here. The question is why a stock would have value if it doesn't pay dividends. If there's a good reason for that then buybacks are perfectly sensible. If there isn't then such companies are engaged in some sort of weird scheme regardless of buybacks.
They're currently a replacement for dividends because dividends are less tax-efficient than stock buybacks.
I struggle with the same initial impression as you, and have reached an uneasy peace with the status quo by telling myself that the stock price is about the amount of dividends the company could issue in a dividend-friendlier tax environment, once its growth plateaus and it goes into cash-cow mode.
Even for companies that do not pay dividends, buybacks should increase the value of each share, because you share profits with fewer other shareholders.
Buybacks raise the EPS/earning-per-share by lowering the denominator (number of outstanding shares).
EDIT:
If P/E stays the same, but the E (earnings) grows, the P (price) has to grow too.
I think it’s quite uncontroversial to equate buybacks with dividends. Personally, I prefer dividends, even if they’re suboptimal tax-wise.