What does the stock split of Broadcom mean for investors?

Broadcom AVGO announced a 10-for-1 stock split alongside its second-quarter earnings. This means investors will receive nine additional shares for every one they own. Morningstar equity analyst William Kerwin raised his fair value estimate for the company to $1,550 per share. After the split, this will be adjusted to $155 per share. The last time Broadcom split its shares was in 2016 when it was acquired by Avago. The company’s shares have risen by 31% this year and 82% over the past 12 months due to investor interest in artificial intelligence. The growth of AI and the acquisition of VMware have led to the stock split. Investors will receive additional shares on July 12, and trading will begin on July 15.

Stock splits do not alter a company’s fundamentals. Morningstar’s fair value estimate and the stock’s economic moat rating will not be affected by the split. Companies often split their shares when the price becomes too high for individual investors to purchase, in order to improve liquidity and attract more buyers. It can also make the shares more appealing to investors, even though the underlying value of the company remains the same.

Broadcom’s stock split follows other high-profile splits, such as Nvidia’s 10-for-1 split and Walmart’s three-for-one split. Alphabet, Tesla, and Amazon also announced stock splits in 2022. Overall, stock splits are a common way for companies to manage their share price and attract more investors.

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