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Rising Trend in Stock Splits: Meta Platforms Inc. a Potential Candidate
There has been a noticeable increase in the number of companies enacting stock splits this year, prompting Wall Street to speculate on which large enterprises might follow suit. Analysts have identified Meta Platforms Inc. as a strong candidate for a stock split, given its significant rise in share price over the past year.
Meta is the only company among the prominent "Magnificent Seven" that has yet to split its shares. Despite a slight dip from its peak in April, Meta's stock has surged over 450% from a low point in 2022 and is currently trading above $500 per share. Industry experts, including Ken Mahoney, president of Mahoney Asset Management, believe Meta is well-positioned for a stock split, which would potentially make its shares more accessible to smaller retail investors and employees.
While a stock split does not affect the intrinsic value of a company, it lowers the price per share, thus making it more attractive to a broader range of investors. Additionally, this move could increase the likelihood of high-priced technology stocks being included in the price-weighted Dow Jones Industrial Average. Notably, no stock within the Dow currently trades above $500 per share.
Nvidia's Recent Split Sparks Interest
The resurgence of interest in stock splits was catalyzed by Nvidia Corp., which began trading on a split-adjusted basis after announcing a 10-for-1 split in May. Nvidia’s stock has climbed 28% since this announcement, and it stands as the sixth S&P 500 company to declare a stock split this year, rising from four companies in 2023. Analysts at Bank of America suggest this trend indicates a potential surge in stock splits within the tech sector.
Among the "Magnificent Seven," Nvidia's decision marks the fourth such move since 2022, joining Alphabet Inc., Amazon.com Inc., and Tesla Inc., with Apple Inc. having executed its own split in 2020. Bank of America has also identified other tech companies as potential candidates for stock splits, including Broadcom Inc., Lam Research Corp., Super Micro Computer Inc., KLA Corp., and Netflix Inc.
Mixed Outcomes of Stock Splits
Microsoft Corp., despite trading below $500 per share, might also be on the brink of a stock split, given that it hasn't initiated one in over two decades. Nevertheless, it is important to note that stock splits do not consistently lead to outperformance. Data from Bank of America indicates that 30% of stocks that underwent splits experienced negative returns within the following 12 months. Furthermore, research by Trivariate Research highlights that megacap companies had mixed results after splitting their shares. For instance, Tesla saw slumps post its most recent split, and Nike Inc. faced declines after its 2015 split.
Key Developments in Technology
Apple Inc.'s New AI Features
In a significant move, Apple Inc. unveiled new artificial intelligence features, establishing a partnership with OpenAI, the creator of ChatGPT. The tech giant is betting on a personalized approach to attract customers.
Elon Musk’s Stance on Apple Devices
Billionaire Elon Musk has threatened to ban Apple devices from his companies if OpenAI's AI software becomes integrated at the operating system level, citing security concerns.
Raspberry Pi's Market Debut
Raspberry Pi, a British personal computer maker, saw a substantial rise in shares on its first day as a public company, offering a positive sign for London's market for new stock listings.
Saudi Aramco's Investment in AI
Saudi Aramco’s venture capital arm has increased its investment in Tenderd, a UAE-based firm supported by Peter Thiel. Tenderd uses AI-generated insights to aid in reducing emissions.
Legislation on TikTok
A California lawmaker has withdrawn a proposed ban on the social media app TikTok for state government devices, owing to a federal law mandating its parent company to sell the app or face a shutdown in the US.
Earnings Reports
Oracle is expected to release its earnings report post-market on Tuesday.
