The number of companies doing stock splits is on the rise this year, prompting Wall Street to look for new candidates, and some analysts suggest that Meta Platforms Inc. could be next to split its stock into multiple units.
Meta is the only one of the Big Seven companies that has never split its stock. While the stock has fallen from its April highs, it has surged more than 450% from its 2022 lows.
Meta stock price at $500
Ken Mahoney, president of Mahoney Asset Management, noted that this level is key for investors, saying: “Trading at $500 per share makes Meta very ripe for a split.”
The stock has benefited from growing interest in artificial intelligence, share buybacks and dividends over the past year. Meta shares fell as much as 0.7% in early trading Tuesday.
A stock split doesn’t change a company’s fundamentals, but it splits the price of a single share. That could make a stock more attractive to small retail investors and employees, who might otherwise be put off by rising stock prices. It could also make big tech stocks more likely to be included in the Dow Jones Industrial Average, which is weighted by price, since none of its stocks currently trade above $500.
The practice came back into focus after Nvidia shares began trading on a post-split basis yesterday, following its 10-for-1 split announcement in May, and the stock has risen 28% since then.
Nvidia, which specializes in artificial intelligence chips, is the sixth S&P company to announce a stock split this year, compared to four companies in 2023.
The Seven Greats Stocks
Bank of America analysts believe this is a sign of more moves to come in the tech sector. Nvidia is the fourth of the Big Seven companies to split its stock since 2022, along with Alphabet, Amazon.com and Tesla. Apple split its stock in 2020, a few years ago.
Bank of America recently identified a group of potential stock split candidates, including tech companies such as Broadcom, Lam Research, Super Micro Computer, KLA and Netflix. Analysts also mentioned Microsoft, which, while not close to $500 a share, could be eligible for a stock split now, having not split its shares in more than two decades.
Stock splits are by no means guaranteed to outperform. About 30% of companies that split their stocks had negative returns after 12 months, according to Bank of America. Moreover, analysis by Trivariate Research found that large companies that split their stocks had mixed results in the year following the split, with Tesla, for example, falling after its last split and Nike, after its split in 2015.
