Stock splits don’t have a fundamental impact on the health of the business, but they are a sign that investors should pay attention to the health of the business. Data from Bank of America shows that companies that split their shares tend to outperform the broader market and generate leveraged returns over time.
Companies are splitting shares because their share prices are rising and are expected to continue rising to levels that make them difficult for large parts of the market, including their employees, to own. Their stock prices rise because the business is generally healthy, either growing strongly or generating cash flow to maintain a return on capital. They are expected to continue to grow due to pent-up demand; investors want more.
When it comes to ownership, stock splits will help employees the most. Companies like Broadcom NASDAQ: AVGOCasey’s Department Stores NASDAQ: CASEYand Costco NASDAQ: VALUE use multiple options that allow their employees to purchase stock, such as ESPPs, RSUs, and stock options. However, with shares trading at around $250, $400 and nearly $1,000 respectively, it is difficult for employees to buy shares without breaking the family budget or creating problems for the business. In this scenario, a company can make it easier for its employees and the broader market to purchase shares without harming its budget, investment goals, or portfolio allocation by initiating a stock split.
Broadcom: Split in 2024 and could break up again soon
Broadcom today
(As of 12/24/2024 5:19 PM ET)
- 52 week range
- $104.15
▼
$251.88
- Dividend yield
- 0.98%
- P/E ratio
- 208.24
- Target price
- $221.88
Broadcom could be in for another stock split. The company’s shares are up more than 400% over the past two years and 30% since its last earnings report. Trading at $230 is quite affordable for most investors; however, AI-led growth, robust cash flow and returns on capital will support the market’s upward trend and could soon return the stock above $500.
Analyst reaction to the fourth-quarter 2024 report was overwhelmingly bullish and pointed to new highs for this market likely to be reached in early 2025. The upward trend in analyst sentiment is likely to continue into 2025 due to the momentum shown in the report and the potential for caution. in guidelines and forecasts. The company’s focus on infrastructure software is paying off well, with the segment growing double-digit organically at the end of 2024, with the acquisition of VMWare pushing it into the triple-digit range. Both the legacy business and VMWare are expected to gain traction in 2025. Revenue growth is projected to be around 15% in 2025 and accelerate in 2026 and 2027, driven primarily by dedicated AI accelerators for leading hyperscalers and AI infrastructure.
Casey’s Department Stores: Self-Financed Growth Supports Uptrend in Stock Prices
Casey’s Department Stores Today
Casey’s Department Stores
(As of 12/24/2024 4:10 PM ET)
- 52 week range
- $268.07
▼
$439.68
- Dividend yield
- 0.50%
- P/E ratio
- 28.13
- Target price
- $424.00
Casey’s General Stores is renowned for its ability to pay dividends and repurchase shares while funding the expansion of its convenience store empire. It is the third largest convenience store chain in the United States and recently completed the acquisition of Texas-based Fikes to its portfolio. The company will use this acquisition as a foundation to expand and deepen its penetration into the Southwest, continuing the trends that have driven its share price higher over the past two decades. The stock, trading at nearly $400 per share, has reached a level where a split is likely, and price action is expected to continue rising in 2025.
Costco: Stock split and special dividend in future
Costco wholesale today
Costco wholesale
(As of 12/24/2024 5:19 PM ET)
- 52 week range
- $640.51
▼
US$1008.25
- Dividend yield
- 0.48%
- P/E ratio
- 56.30
- Target price
- $1011.74
Costco shares are trading at around $1,000 and will likely be split due to the high share price. Robust growth, industry leadership and robust cash flow support the stock price trend, which is expected to continue into 2025. return of capital. Building cash is critical because Costco will pay a special payout when it reaches a high enough level for investors to expect. Trends suggest this level will be reached by the end of 2025 or early 2026 and could be worth $15 per share. Trends also indicate that Costco may pay a special dividend every two to four years.
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