Stock splits are a major market theme in 2024, with some of the world's biggest names getting involved. Cross-industry companies from Walmart arrive Chipotle Mexican BBQlaunched such business last year. and NVIDIA and Broadcom Leading the wave of artificial intelligence (AI) industry, each completed a 10-to-1 stock split.
Why do investors love stock splits? While they don't change any of the company's fundamentals, they do lower the price per share, making the stock more accessible to a wider range of investors. The move could also be seen as a sign of management's confidence that the stock has the ability to rise from its new lower price.
So it's logical that investors always pay attention to stock splits, especially when the stock price of a highly successful company soars to highs. One particular artificial intelligence company now looks ripe for breakup. The stock has gained 65% in the past year and currently trades above $600. My prediction is that this well-known company will be the next AI company to announce a spinoff.
Before I reveal the name of this company, I'll give you a few more clues about its identity. The tech giant is the only member of the "Big Seven" -- the stocks that drove the market higher last year -- that has never had a stock split. what i said is meta platform (NASDAQ: META)owner of social media platforms Facebook, Messenger, WhatsApp and Instagram.
Thanks to its social media dominance—more than 3.2 billion people use at least one of its apps every day—Meta's revenue and profits have climbed into the billions. Its shares have been rising and are trading near an all-time high today.
Meta generates most of its revenue through advertising, as advertisers use one of the company's apps to find us where they know they'll find us. But Meta has aggressively moved into artificial intelligence, making it the company's largest investment area last year, and Meta said it will increase its investment in artificial intelligence this year as well.
CEO Mark Zuckerberg has said he's interested in developing artificial intelligence that all Meta users can rely on to accomplish anything important to them — from business to leisure activities. To achieve this goal, the company developed its own large language model (LLM) and is currently training the latest version, Llama 4. During a recent earnings call, Zuckerberg said Meta is seeing rapid adoption of the recently released Meta AI, the company's first artificial intelligence assistant - Llama - which is "quickly becoming the standard across the industry."
Meta can win in artificial intelligence in a few different ways. First, the more time we spend on Meta apps (thanks to potential AI tools and features), the more advertisers will be willing to invest in reaching us. This equals more revenue for Meta.
Second, Meta’s AI investments may lead to other AI products and services. Ultimately, Meta’s work on the LL.M. and making it available to the developer community could differentiate the company as an AI leader. As a result, Meta may be heading for an exciting new era of growth.
Now let's consider my prediction. Why is now a good time for Meta to split its stock? Meta's price of over $600 may scare away some investors - although the valuation looks very reasonable (24x forward earnings). The $1,000 per share level is a psychological barrier for some investors, who may view the stock as expensive regardless of its valuation. Therefore, companies starting to approach this level might consider starting a business to avoid this problem.
Additionally, some investors don't have access to fractional shares, and they may not have the budget to invest in Meta at today's levels. Therefore, a stock split, which lowers the price per share by issuing more shares to existing holders, can provide an investment opportunity for these potential buyers.
Finally, as mentioned earlier, Meta should see more growth in the future due to its investments in artificial intelligence, so the stock has the ability to climb from new, lower price points.
All of this supports the idea of announcing a stock split, which is why I predict Meta will be the next AI player to make such a move. The good news is that even if that's not the case, Meta is still a solid buy-and-hold candidate for growth investors over the long term.
Ever feel like you missed out on an opportunity to buy the most successful stocks? Then you'll want to hear this.
On rare occasions, our expert team of analysts will publish 'Double Down' Stocks Recommend companies they think will be popular. If you're worried that you've missed out on an investment opportunity, now is the best time to buy before it's too late. The numbers speak for themselves:
NVIDIA: If you invested $1,000 in 2009 when we doubled down, You will have $357,084!*
apple: If you invested $1,000 in 2008 when we doubled down, You will have $43,554!*
Netflix: If you had invested $1,000 in 2004 when we doubled down, You will have $462,766!*
We're currently issuing "double down" alerts on three companies that are incredible and likely won't be available again anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns as of January 13, 2025
Randi Zuckerberg is the former director of market development and spokesperson for Facebook, the sister of Meta Platforms CEO Mark Zuckerberg, and a board member of The Motley Fool. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions and recommendations at Chipotle Mexican Grill, Meta Platforms, Nvidia, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: Short the $54 December 2024 Chipotle Mexican Grill put. The Motley Fool has a disclosure policy.
Prediction: This will be the next AI company to split its stock Originally published by The Motley Fool