As Apple and Tesla Split, 13 More Companies Should Consider Stock Splits Immediately
Investing in 2020 has been anything but usual. From an 11-year bull market to a bear market and instant recession, only to be followed by new all-time highs all over again. One trend that used to be very common in raging bull markets was stock splits. As stocks would rise to levels that the company thought was becoming a high dollar amount, they would split their stock and double, triple or quadruple their share count by lowering their stock prices by a similar amount.
Stock splits technically do not change the underlying fundamentals of a company. They are simply a mechanical function around a stock price. After all, the company’s revenues, net income, gross margin and market capitalization are all the same. That said, there is still a very strong argument that can be made showing just how much investors psychologically love seeing stock splits.
After Friday’s close, two very high-profile stock splits are taking place. 24/7 Wall St. thinks there are some other stocks that could and should split their shares in their wake. Sometimes even a mechanical event is worth the effort.
The mighty Apple Inc. (NASDAQ: AAPL) is set to see a four-for-one stock split, and that is its first since Apple’s seven-for-one split back in 2014. Apple was trading at $384.07 ahead of earnings and the split announcement, but the shares popped to $424.28 the next day, and the stock has since hit $500 ahead of the coming iPhone 12 launch.
Tesla Inc. (NASDAQ: TSLA) has claimed that it wants its own shares more affordable for investors and employees. Tesla’s stock price jumped 10% to over $1,500 after the split was announced, but its shares were handily above $2,250 on Friday. Tesla’s stock split is five for one, and its market cap is now well above $400 billion.
One argument that signals the psychological and physical impact of stock splits is the inverse case. With the dreaded reverse-split, a company shrinks its share count and raises its share price by the similar amount. Reverse splits are generally handled to avoid delisting from the New York Stock Exchange or Nasdaq, and they frequently are followed by an attack by short sellers, who see the effort solely as a gimmick and yet another opportunity to short sell more shares at a higher price.
24/7 Wall St. would never suggest that every company with a high stock price needs to announce a split. That said, some stocks look and feel like they could use a split. Some companies may want to appeal to their broad base of customers with a share price adjustment based on the cost of their goods or services. Some companies may even view their own customers as perhaps the most ideal shareholders.
Many investors could argue that 50 or even 100 more companies should consider stock splits. This review focuses on the companies that are more widely traded and are also very well known. We have not suggested how much of a split should be seen, because every company is different. There is also a dark side of stock splits, which is detailed below.
Here are 13 other companies that should seriously entertain splitting their stocks. Some of these are not the so-called FAANG stocks and other high-flying tech stocks. These all have considerably higher share prices. Key performance metrics have been included for each, along with some additional color.
Amazon: Up 500% in Five Years
Amazon.com Inc. (NASDAQ: AMZN) was last seen trading at $3,400, and its 52-week range is $1,626.03 to $3,453.00. It has a $1.7 trillion market cap, and its stock has traded with a hefty price for some time, hitting $2,000 for the first time in mid-2018 and breaking above $1,000 in mid-2017. In some ways, Jeff Bezos may have pioneered the trend of not wanting to make stock splits. That said, Amazon obviously pays no dividend, and the history of splits shows that its stock split twice in 1999 and once in 1998, back before the 2000 dot-com bubble burst.
Alphabet/Google: Up Almost 200% Since 2015
Alphabet Inc. (NASDAQ: GOOGL) was last seen trading above $1,600, and its 52-week range is $1,008.87 to $1,652.79. It now has a $1.1 trillion market cap. Alphabet effected a split in 2014, with the creation of the dual classes of stock. Sadly, most investors today don’t know which Alphabet is which, and many still wonder why the company even bothered changing the Google name. Alphabet pays no dividend and likely will not for the foreseeable future.
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