Surging over 450% from the low point! Is Meta poised to follow NVIDIA as the next tech company to split its stock?
Since the beginning of this year, the number of companies splitting their stocks has been increasing, and Wall Street is starting to pay attention to who might be next. Analysts believe that the next company could be Meta. Despite a recent pullback in stock price, it has still risen by over 450% from its low point in 2022. Analysts think that Meta's stock price has surpassed $500, indicating that the timing for a split is ripe. Stock splits can lower the price per share, making it more attractive to retail investors and employees. Furthermore, stock splits may also increase the likelihood of top tech stocks being included in the Dow Jones Industrial Average. After NVIDIA announced its stock split, the stock price rose by 28%
According to Zhitong Finance and Economics APP, the number of companies implementing stock splits has been increasing this year, drawing attention from Wall Street on who might be the next - some analysts believe it could be Meta (META.US).
Meta is the only company among the so-called "Big Seven" that has never split its stock. Despite the stock falling from its all-time high in April, it is still up over 450% from the low point in 2022.
Ken Mahoney, President of Mahoney Asset Management, stated that Meta's stock price is now over $500, indicating that "the timing for a split is ripe." Over the past year, the stock has benefited from interest in artificial intelligence exposure, stock buybacks, and dividends.
Although a stock split does not change the fundamentals of a company, it does lower the price per share. This can make the stock more attractive to smaller retail investors and employees who might otherwise be deterred by a high stock price. It may also increase the likelihood of top tech stocks being included in the price-weighted Dow Jones Industrial Average - currently, no stock in the index trades above $500 per share.
Furthermore, a stock split does not guarantee that the company's stock will outperform the market: according to data from Bank of America, around 30% of stocks have shown negative returns in the 12 months following a split. Additionally, an analysis by Trivariate Research found that the performance of large-cap companies after a split is mixed, for example, Tesla (TSLA.US) saw a decline in stock price after its most recent split, as did Nike (NKE.US) after its split in 2015.
However, after NVIDIA (NVDA.US) announced a 10-for-1 stock split in May, the stock began trading at the adjusted split price on Monday, and the company's stock price has since risen by 28%, once again drawing attention. This AI company is the sixth S&P 500 constituent to announce a split this year, an increase from the four in 2023.
Analysts at Bank of America believe this signals a sign for the future development of the tech industry. NVIDIA's split marks the fourth company among the "Big Seven" to take such action since 2022 - the other three being Google (GOOGL.US), Amazon (AMZN.US), and Tesla - with Apple (AAPL.US) having split in 2020.
Bank of America recently identified companies that may split their stock, including Broadcom (AVGO.US), Lam Research (LRCX.US), Super Micro Computer (SMCI.US), KLA Corporation (KLAC.US), and Netflix (NFLX.US) among other tech companies Analysts also pointed out that although the stock price of Microsoft (MSFT.US) has not approached $500 per share, it is possible that the company is preparing for a stock split, as it has never taken this measure in over 20 years