Nvidia recently became the eighth company this year to announce a forward stock split. Although stock splits do not impact a company’s market value, they historically have a bullish effect. Bank of America analysis suggests that stock splits can result in an average one-year return of 25%, compared to around 12% for the broader market. This trend is consistent across different market conditions.
The primary reason companies opt for stock splits is to make their shares more accessible to employees and retail investors. High stock prices can deter potential investors from buying into a company. Nvidia and Walmart cited this reason when choosing to implement a stock split.
Bank of America identified around 36 companies in the S&P 500 Index with stock prices exceeding $500 per share as potential candidates for stock splits. Among these, eight companies have share prices above $1,000 per share and are more likely to split their shares in the future.
Some of the high-priced S&P 500 stocks that could potentially undergo a stock split include:
1. Outdoor Deckers (DECK) with a market price of $1,033.80 and a market value of $26.5 billion.
2. TransDigm Group (TDG) with a market price of $1,348.40 and a market value of $75.5 billion.
3. The righteous Isaac (ICO) with a market price of $1,371.89 and a market value of $33.9 billion.
4. Broadcom (AVGO) with a market price of $1,411.14 and a market value of $654.0 billion.
5. Mettler-Toledo (BAT) with a market price of $1,474.15 and a market value of $31.5 billion.
6. Auto zone (AZO) with a market price of $2,790.63 and a market value of $48.3 billion.
7. Stock reserves (BKNG) with a market price of $3,795.04 and a market value of $128.7 billion.
8. NVR Inc. (NVR) with a market price of $7,438.82 and a market value of $23.3 billion.
Stock splits are viewed as a positive sign of company strength, indicating potential growth in profits of the underlying business. They enhance liquidity by making stocks more affordable and approachable to a broader range of investors.
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https://www.businessinsider.com/stock-splits-are-bullish-high-priced-sp500-stocks-next-nvidia-2024-5