Wall Street’s Newest Stock-Split Stock Has Arrived — and Here’s the Magnificent Stock Likely to Follow in Its Footsteps
2024-10-09 11:06:00
For almost two years, artificial intelligence (AI) has been the top trend powering Wall Street’s major stock indexes higher. But over the last nine months, excitement surrounding stock splits has played an equally important role in boosting the value of select market-leading companies.
A stock split gives publicly traded companies the option of superficially adjusting their share price and outstanding share count by the same magnitude. These changes are surface-scratching in the sense that they have no impact on a company’s market cap or operating performance.
This generational business might be Wall Street’s next stock-split stock
While there are quite a few standout businesses that appear ripe for a stock split, including warehouse club Costco Wholesale, software company Adobe, and pharmaceutical giant Eli Lilly, the one that may be the likeliest to walk in Sony’s footsteps and announce a split is social media leader Meta Platforms (NASDAQ: META).
Interestingly enough, Meta is the only member of the “Magnificent Seven” to have never completed a stock split. But with its shares topping $600 on an intra-day basis to open this week, there’s a clear reason to make its stock more nominally affordable for everyday investors.
Meta is best-known as the parent of leading social media destinations Facebook, WhatsApp, Instagram, and Facebook Messenger, among other sites. During the June-ended quarter, Meta attracted 3.27 billion people to its apps on a daily basis. No social media company comes remotely close to luring this many daily active users (DAUs).
The advantage of having more than 3.2 billion DAUs is that advertisers will often pay a premium to get their message(s) in front of consumers. Since economic expansions last considerably longer, on average, than recessions, an ad-driven operating model like Meta is usually able to command exceptionally strong ad-pricing power.
But Meta is also gearing up for a future that should feature sustained double-digit growth potential. It’s aggressively investing in its AI ambitions by spending in the neighborhood of $10.5 billion to purchase 350,000 AI-graphics processing units (GPUs) from Nvidia. These chips will power Meta’s AI-accelerated data centers.
Meanwhile, the company’s money-losing Reality Labs segment is building on CEO Mark Zuckerberg’s metaverse vision behind the scenes. Meta is positioning itself to be a key on-ramp to the metaverse, although it could take years before the company’s investments yields meaningful revenue.
To add, Meta Platforms is sitting on a truly enviable amount of cash. It closed out the midpoint of 2024 with $58.1 billion in cash, cash equivalents, and marketable securities, and is pacing north of $77 billion in net cash generated from its operations for the current year. Meta’s balance sheet affords it the luxury of taking risks.
Perhaps no company is primed to become Wall Street’s next stock-split stock more than Meta Platforms.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends Adobe, Costco Wholesale, Meta Platforms, Nvidia, and Walmart. The Motley Fool has a disclosure policy.
Wall Street’s Newest Stock-Split Stock Has Arrived — and Here’s the Magnificent Stock Likely to Follow in Its Footsteps was originally published by The Motley Fool
