However, there are a few reasons why stock splits can impact a company’s performance. Some large companies were listed on the Dow Jones Industrial Average shortly after their splits. This index is price-weighed so that you won’t find a stock priced at $2,000 per share. Amazon (NASDAQ:AMZN) only got added to the Dow Jones after a 20-for-1 stock split in 2022. Stock splits also make a stock’s option contracts more accessible to investors.
Investors also saw recent stock splits like Chipotle (NYSE:CMG), Nvidia (NASDAQ:NVDA) and Broadcom (NASDAQ:AVGO) attract more investors. Discovering stocks before they split can lead to a short rally. These corporations will likely initiate stock splits in the future and can generate solid returns while you wait.
Costco (COST)
Costco (NASDAQ:COST) trades above $800/share and looks like a good stock split candidate. There is a precedent, as Walmart (NYSE:WMT) initiated a 3-for-1 stock split earlier this year. Walmart traded below $200/share before that split.
A stock split can attract more attention to Costco and help it expand its lead over the market. Shares are up 29% year-to-date and have almost tripled over the past five years. The stock has a 0.55% yield and occasionally pays elevated special dividends.
Costco delivered solid results in June, suggesting that more gains are coming. Net sales for the first 44 weeks are up by 6.9% year over year, while June’s comparable sales increased by 5.3% year over year. E-commerce maintained a double-digit growth rate in June and over the first 44 weeks of the year. Costco also announced that it will raise its annual membership by $5. The move results in more money for shareholders without an excessive price hike that will scare away customers.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) has led the stock market to new highs. Shares are up by 38% year-to-date and have gained 140% over the past five years. The stock’s price briefly touched $500/share, and it looks like it will reclaim that level in the future. The high stock price and the company’s lack of stock splits suggest that Facebook’s parent company is a stock split candidate.
The company makes almost all of its revenue from online ads. The formula has worked for many years and didn’t disappoint in the first quarter. Revenue increased by 27% year over year, while net income was up by 117% year over year. Zuckerberg has prioritized shareholders for several quarters, emphasizing the company’s plan to become more efficient. The company has also initiated many stock buybacks and recently gave out dividends.
A strong focus on the stock and shareholders can result in a split. The stock split can further thrust Meta Platforms into the spotlight and reward long-term investors.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) hasn’t been a stranger to stock splits. It’s done nine stock splits throughout history, but the last one was over 20 years ago. Furthermore, the stock splits aren’t as dramatic as other companies. Instead of doing 10-for-1 stock splits or similar numbers, Microsoft routinely ran 2-for-1 stock splits.
A 2-for-1 or 3-for-1 stock split makes sense at current levels. Microsoft trades above $400 per share. Shares are up by 18% year-to-date and have gained 220% over the past five years. Those gains should extend as Microsoft reported 17% YOY revenue growth in the third quarter of fiscal 2024. Cloud is the largest segment, growing by 23% year-over-year to reach $35.1 billion in revenue.
Microsoft also saw solid growth rates for its other segments. Revenue from productivity and Business Processes increased by 12% year over year, while revenue from the More Personal Computing segment was up 17% year over year. Microsoft also returned $8.4 billion to shareholders this quarter through stock buybacks and dividends.
On this date of publication, Marc Guberti held long positions in AMZN, NVDA, AVGO, and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.