Stock splits are on the rise, with more anticipated in 2025 according to Bank of America. These actions generally follow strong stock performances and serve to make shares more affordable for investors. Stock splits have shown a tendency to result in increased performance, although macroeconomic factors can influence outcomes. Bank of America identified a list of high-priced stocks likely to split in 2025, with several rated as “Buy.”
Stock splits are experiencing a resurgence, with projections for even more in 2025, as indicated by Bank of America (BofA). The rise in stock prices often drives these splits, allowing shares to become more accessible to investors. Historically, splits lead to periods of notable stock outperformance, establishing them as potential growth opportunities. In the previous year, companies initiated more stock splits than at any point since 2013, suggesting a continuation of this trend into 2025.
Typically, firms choose to split their shares when their prices escalate, which can deter some investors from entering. This strategy involves an increase in the total number of shares outstanding while proportionately diminishing the price per share. For instance, Nvidia conducted a 10-for-1 split that reduced the share price from approximately $1,210 to about $121, yet shareholders ended up with nine additional shares for each they held.
Bank of America noted that stocks often split following a series of strong performances. Since 1980, companies that executed splits demonstrated an annual return of 28.4% over five years prior to their announcements, with an average return of 67% in the preceding year. Moreover, following the announcement of a split, stocks recorded average total returns of 25% over the next 12 months, notably surpassing the broader index’s 12% return.
Nonetheless, external economic conditions can impact the performance of stocks that split. In 2022, despite initiating splits, firms such as Amazon, Google, and Tesla faced challenges as interest rates increased. More recently, Super Micro Computer experienced a decline of approximately 50% post-split announcement in August 2024, indicating that not all splits will yield positive outcomes.
BofA compiled a selection of high-value stocks, specifically those exceeding $500 per share—historically the most expensive 8% of stocks—as likely candidates for splits in 2025. The following list includes firms rated as “Buy” by Bank of America, along with their performance over the last year:
1. NVR (Consumer Discretionary) – 12.5% return.
2. TransDigm Group (Industrials) – 30.6% return.
3. O’Reilly Automotive (Consumer Discretionary) – 24.7% return.
4. ServiceNow (Information Technology) – 44.9% return.
5. Blackrock (Financials) – 38.1% return.
6. Netflix (Communication Services) – 69.2% return.
7. Costco Wholesale (Consumer Staples) – 39.2% return.
8. Equinix (Real Estate) – 11.1% return.
9. Eli Lilly & Co (Healthcare) – 25.6% return.
10. United Rentals (Industrials) – 18.7% return.
11. KLA (Information Technology) – 19.5% return.
12. Meta Platforms (Communication Services) – 68.6% return.
13. Parker-Hannifin (Industrials) – 41.5% return.
14. Goldman Sachs Group (Financials) – 73% return.
15. Axon Enterprise (Industrials) – 149.5% return.
16. McKesson (Healthcare) – 24.6% return.
17. Intuit (Information Technology) – -8.7% return.
18. Ameriprise Financial (Financials) – 48.8% return.
19. Thermo Fisher Scientific (Healthcare) – 3% return.
20. Intuitive Surgical (Healthcare) – 51.2% return.
21. UnitedHealth Group (Healthcare) – 8.6% return.
22. Synopsys (Information Technology) – -4.4% return.
23. Teledyne Technologies (Information Technology) – 18.3% return.
In conclusion, stock splits may indeed act as a catalyst for heightened market performance, particularly when executed following significant price increases. Companies with high share prices may leverage splits to attract a broader investor base and stimulate further growth. However, it is imperative to consider broader economic conditions that may influence stock performance post-split.
Original Source: www.businessinsider.com
Leave a Reply