Meta’s Surge May Spark Tech Stock Splits

A growing number of stock splits this year has analysts looking for potential candidates, with Meta Platforms Inc. (NASDAQ:META) being a leading contender.

Among the “Magnificent Seven” tech giants, Meta is the only one that hasn’t split its shares. Despite trading below its all-time highs from April, the stock has soared over 450% since its 2022 low.

“Meta is ripe for a split,” said Ken Mahoney, president of Mahoney Asset Management, pointing out the significant price level for investors as it trades above $500 a share. Meta has benefited from the market’s appetite for AI, share buybacks, and the introduction of a dividend in the past year.

On Tuesday, Meta shares dropped as much as 0.7% in early trading.

Stock splits don’t change a company’s fundamentals but lower the price per share, making stocks more accessible to smaller retail investors and employees who might be discouraged by high share prices. This adjustment could also make top tech stocks more likely to be included in the price-weighted Dow Jones Industrial Average, where no stock currently trades above $500 a share.

The focus on stock splits intensified after Nvidia Corp. (NASDAQ:NVDA) shares began trading on a split-adjusted basis Monday, following its 10-for-1 split announcement in May. Nvidia’s stock has risen 28% since the announcement. It is the sixth S&P 500 company to announce a stock split this year, an increase from four in 2023.

Bank of America analysts suggest that more tech sector splits could be on the horizon. Nvidia’s move marks the fourth “Magnificent Seven” company to split shares since 2022, following Alphabet Inc. (NASDAQ:GOOG), Inc. (NASDAQ:AMZN), and Tesla Inc. (NASDAQ:TSLA). Apple Inc. (NASDAQ:AAPL) executed its own split in 2020.

Bank of America also highlighted other potential candidates for stock splits, including Broadcom Inc. (NASDAQ:AVGO), Lam Research Corp. (NASDAQ:LRCX), Super Micro Computer Inc. (NASDAQ:SMCI), KLA Corp. (NASDAQ:KLAC), and Netflix Inc. (NASDAQ:NFLX). They noted that Microsoft Corp. (NASDAQ:MSFT), though not trading near $500 a share, might also be poised for a split as it hasn’t done one in over two decades.

However, it’s important to note that stock splits do not guarantee outperformance. According to Bank of America, around 30% of stocks that split shares experienced negative returns 12 months later. Additionally, an analysis from Trivariate Research found mixed results for megacap companies that split shares, highlighting post-split slumps in Tesla and Nike Inc. (NYSE:NKE) after its 2015 split.