Meta (NASDAQ:META) is the only stock among the so-called Magnificent Seven that has never split its shares. Despite being off its all-time highs from April, Meta has surged more than 450% from its 2022 lows.
Currently trading above $500 a share, Meta is ripe for a stock split, according to Ken Mahoney, president of Mahoney Asset Management. This level is significant for investors. Meta has benefited from increased interest in AI, stock buybacks, and the introduction of a dividend in the past year.
On Tuesday, Meta shares dipped as much as 0.7% in early trading.
While splitting shares does not alter a company’s fundamentals, it lowers the price per share, making the stock more accessible to smaller retail investors and employees who might be deterred by high prices. Additionally, a lower share price could make these stocks more likely candidates for inclusion in the price-weighted Dow Jones Industrial Average, where currently no stock trades above $500 a share.
The practice of stock splitting gained attention recently when Nvidia Corp. shares began trading on a split-adjusted basis Monday, following its announcement of a 10-for-1 split in May. Since then, Nvidia’s stock has risen 28%. Nvidia is the sixth member of the S&P 500 to announce a stock split this year, up from four in 2023.
Analysts at Bank of America suggest that more tech sector splits are likely. Nvidia’s move marks the fourth Magnificent Seven company to split shares since 2022, joining Alphabet Inc., Amazon.com Inc., and Tesla Inc. Apple Inc. conducted its share split in 2020.
Bank of America recently identified potential candidates for stock splits, including technology companies like Broadcom Inc., Lam Research Corp., Super Micro Computer Inc., KLA Corp., and Netflix Inc. They also noted that Microsoft Corp., although not near $500 a share, could be poised for a stock split as it hasn’t done one in more than two decades.
However, splitting shares doesn’t guarantee outperformance. According to Bank of America, 30% of stocks that split shares experienced negative returns 12 months later. Additionally, an analysis by Trivariate Research found mixed results for megacap companies that split shares, with notable slumps in Tesla after its most recent split and Nike Inc. after its 2015 split.
Featured Image: Unsplash
