On March 19, 2024, Chipotle Mexican Grill Inc. (NYSE: CMG) announced a 50-for-1 stock split. If approved by shareholders at the company's annual meeting in June 2024, shareholders who hold shares on the record date of June 18 will receive 49 additional shares of CMG stock for every share of stock they own (including fractional shares).
The Chipotle split may have surprised and delighted investors. But analysts have been eyeing CMG stock as a potential split candidate. That speculation ramped up after Walmart Inc. (NYSE: WMT) announced a 3-for-1 stock split in January 2024.
However, the split has renewed interest in what companies may be next to split their stock.
That's the focus of this special presentation. Despite their ability to buy fractional shares, many retail investors turn away from companies with stocks that carry a high price tag. A split, therefore, can make the company's stock more appealing to a broader range of investors.
Here are seven companies that analysts speculate may be next to split their stock.
Quick Links
- Broadcom
- Lam Research
- Nvidia
- Lululemon
- Costco
- Booking Holdings
- O’Reilly Automotive
#1 - Broadcom (NASDAQ:AVGO)
Retain and institutional investors have not been able to get enough of Broadcom Inc. (NASDAQ: AVGO). Shares have consistently traded above the company's average volume of around 3.07 million.
The stock price is soaring as well. AVGO stock has been up over 100% in the last 12 months, trading for over $1,300 a share as of March 21, 2014. And the stock price growth isn't a recent phenomenon. AVGO stock is up 373% in the last five years.
The bullish case for a split centers around the super cycle that is taking place in the semiconductor industry. To that end, hope for a stock split got more fuel since the company reported a double beat in their March 7, 2024 earnings report. An ideal time to split the stock is when a company believes it will have quarters and years of future growth.
Broadcom has split its stock three times. However, it has not issued a split since being acquired by Avago in 2016.
About Broadcom
Broadcom Inc designs, develops, and supplies various semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide. The company operates in two segments, Semiconductor Solutions and Infrastructure Software.
Read More - Current Price
- $220.79
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $221.88 (0.5% Upside)
#2 - Lam Research (NASDAQ:LRCX)
Lam Research Corporation (NASDAQ: LRCX) is another picks-and-shovel semiconductor stock that may be in line for a stock split. The company has issued two splits in its history. The most recent being a 3-for-1 split in 2000.
Lam Research makes the essential and specialized equipment that foundries need to make semiconductor chips. We are only at the beginning of what is likely to be a multi-year cycle where demand for chips will outpace supply. That makes it a good time for companies like Lam to consider making its stock more attractive to retail investors.
LRCX stock is up 97% in the last 12 months and a whopping 819% in the last five years. However, as the stock price has gone up, the volume of shares traded is down. As of March 21, 2024, LRCX stock is trading at a volume that's about 29% lower than its trailing 12-month (TTM) average.
At $999.29 per share as of this writing, the stock is reaching a level where a stock split may be desirable.
About Lam Research
Lam Research Corporation designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers ALTUS systems to deposit conformal films for tungsten metallization applications; SABRE electrochemical deposition products for copper interconnect transition that offers copper damascene manufacturing; SOLA ultraviolet thermal processing products for film treatments; and VECTOR plasma-enhanced CVD ALD products.
Read More - Current Price
- $71.79
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $97.24 (35.4% Upside)
#3 - Nvidia (NASDAQ:NVDA)
It would be difficult to have a list of companies that may be in line for a stock split and not include Nvidia Corporation (NASDAQ: NVDA). And Nvidia is not a stranger to stock splits. It has split its stock five times since going public in 1999 with the most recent split coming in 2021.
The company manufactures the semiconductor chips that are needed in everything from mobile phones to electric vehicles. Nvidia's graphic processor units (GPUs) are the industry standard for artificial intelligence (AI) applications. And at the company's recent developer's conference, it said it will launch a new GPU platform, Blackwell, that will be faster, more efficient and have more processing power than its current system.
NVDA stock is up 248% in the last 12 months and over 82% through March 19, 2024. More importantly, perhaps is that the stock is approaching the $1,000 price point. By itself, that doesn't mean the stock has a poor value; it could be a psychological barrier that affects trading volume.
That's currently not much of a concern. Trading volume for Nvidia is up 12.5% compared to its TTM volume and up 10.1% from its 5-year average.
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $134.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $164.15 (21.9% Upside)
#4 - Lululemon (NASDAQ:LULU)
Lululemon Athletica Inc. (NASDAQ: LULU) may be the perfect example of the current economy. The athleisure company continues to beat revenue and earnings expectations despite the impact of higher interest rates and inflation on consumers. However, since the company caters to a more affluent base, it's likely that they still have discretionary income available.
That pattern means Lululemon will be less dependent on the interest rate cuts that the Federal Reserve still says it is planning for later in 2024. And that means the company's stock price, which is up 60% in the last 12 months, is likely to continue to rise.
Trading at around $479 per share as of this writing, Lululemon may not need to split its stock yet. The stock is trading at about its TTM volume. However, if you go further back in the company's history, you'll see the volume is down about 20% from its 15-year average. That coincides with the only time LULU stock split, a 2-for-1 split in 2011.
About Lululemon Athletica
Lululemon Athletica Inc, together with its subsidiaries, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. It offers pants, shorts, tops, and jackets for healthy lifestyle, such as yoga, running, training, and other activities. It also provides fitness-inspired accessories.
Read More - Current Price
- $379.42
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 10 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $377.63 (0.5% Downside)
#5 - Costco (NASDAQ:COST)
Costco Wholesale Corporation (NASDAQ: COST) has been the Energizer Bunny of stocks over the past five volatile years. Quarter after quarter, year after year, it just keeps delivering growing revenue and earnings. That's a testament to the company's loyal customers who pay for the privilege of shopping at Costco. It's become one of the best defensive stocks for long-term investors.
The company is also overdue for a membership fee increase. The company's retention rate has stayed well above 90% with past fee increases. There's no reason to believe that would change.
The argument for a stock split starts with a share price above $750, and that the stock trades at around 47x forward earnings. That says the stock is a bit expensive. On the other hand, the average trading volume is down nearly 39% from the stock's 20-year average. Coincidentally, the last of the two stock splits Costco conducted occurred in 2000.
About Costco Wholesale
Costco Wholesale Corporation, together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories.
Read More - Current Price
- $954.07
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $1,011.74 (6.0% Upside)
#6 - Booking Holdings (NASDAQ:BKNG)
Booking Holdings Inc. (NASDAQ: BKNG) stock is up 111% in the last five years. The stock price growth and heightened trading volume are evidence of the exploding demand for consumer travel during that time.
Recent headlines suggest that consumers may be anxious about their mode of transportation, but Booking is agnostic about that. The company is a one-stop shop that helps travelers expedite their travel plans. In the last year, Booking has introduced AI capabilities into its platform, creating a more customized experience.
Booking is a good reminder that stock splits can be good and bad. The only split in the company's history was a 1-for-6 reverse stock split that the company issued in 2003. Many companies never recover from the dilution that happens with a reverse split. But BKNG stock currently trades at over $3,400 a share.
About Booking
Booking Holdings Inc, formerly The Priceline Group Inc, is a provider of travel and restaurant online reservation and related services. The Company, through its online travel companies (OTCs), connects consumers wishing to make travel reservations with providers of travel services across the world. It offers consumers an array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands.
Read More - Current Price
- $5,048.59
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $4,909.90 (2.7% Downside)
#7 - O’Reilly Automotive (NASDAQ:ORLY)
As the electric vehicle (EV) movement has stalled, it gives investors another chance to consider a stock split for O'Reilly Automotive Inc. (NASDAQ: ORLY). ORLY stock is up 42% in the last 12 months, which coincides with the company's revenue and earnings which continue to grow year-over-year.
The auto parts market is likely to be in a multi-year growth cycle as the average age of vehicles increases. Even if interest rates go down in 2024, it will take several months for consumers to pay down the debt they've taken on.
O'Reilly Automotive has conducted two stock splits with the most recent split occurring in 2005. Notably, the stock's trading volume is down 55% compared to its 20-year average. That would mean it could be a likely candidate to split its stock, which is trading above $1,300 per share.
About O'Reilly Automotive
O'Reilly Automotive, Inc, together with its subsidiaries, operates as a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, Puerto Rico, and Mexico. The company provides new and remanufactured automotive hard parts and maintenance items, such as alternators, batteries, brake system components, belts, chassis parts, driveline parts, engine parts, fuel pumps, hoses, starters, temperature control, water pumps, antifreeze, appearance products, engine additives, filters, fluids, lighting products, and oil and wiper blades; and accessories, including floor mats, seat covers, and truck accessories.
Read More - Current Price
- $1,219.11
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $1,269.31 (4.1% Upside)
Stock splits are generally thought to be a bullish indicator, but that perception is based on how investors feel about a stock. The facts make a different case. That's because a stock split doesn't fundamentally change the value of your shares or the company's intrinsic value.
And over time, there's no consensus about how stocks perform 6-9 months after a split. Some stocks have done well, and some have struggled.
In fact, there is some evidence that a higher percentage of companies whose stocks are going down before a stock split perform better after the split.
How you feel about a company's stock split will largely depend on how you felt about the company before the split. If your long-term thesis for owning the stock is still in place, and that the split is being issued to expand the investor pool, there's no reason to sell. On the other hand, if you believe that the split is based on some fundamental change in the business, it may be time to reassess the size of your position.
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