Investing

After Apple and Tesla, 13 More Stock Splits That Should Come Very Soon

Jon C. Ogg

Published: August 13, 2020 8:20 am

Last Updated: August 13, 2020 11:56 am

One trend that used to be very popular and faded away was the corporate decision about stock splits. These are supposed to be mechanical issues, which theoretically have no real change to a company’s underlying fundamentals. Splitting a stock price in half to produce twice the number of shares does not change a company’s revenues, net income, gross margin and market capitalization. That said, a strong argument can be made that investors psychologically love stock splits.

After two very high-profile stock splits, the time is ripe for many other well-known, actively traded stocks to announce stock splits. We have some ideas who might be next.

Apple Inc. (NASDAQ: AAPL) broke the ranks this summer by announcing a four-for-one stock split. This was the first stock split since Apple’s seven-for-one stock split back in 2014, which also made it more palatable for inclusion in the Dow Jones industrial average. Apple’s prior two splits had been on a two-for-one basis in the year 2000 and in the year 2005. Apple was trading at $384.07 ahead of earnings (and the split announcement), but the shares popped to $424.28 the next day on earnings excitement, though the excitement of a stock split has helped contribute to at least some of its gains.

Apple’s shares were last seen up at $452.00, and it is no longer a surprise or a guess about when the iPhone 12 is coming out. As for how splits work over time, a fun factoid is that if an investor bought just one share of Apple back in 1987 and never touched it, then that investor would own 224 shares of Apple after this split was effected.

With Tesla Inc. (NASDAQ: TSLA) now claiming it wanted the shares more affordable for investors and employees, without having to spend close to $1,500 for a single share of stock, Tesla has announced a five-for-one stock split, and the stock was up 10% at $1,514.50 in the aftermath of the announcement.

Another argument in favor of stock splits is the inverse case, which is the dreaded reverse-split. This is where a company shrinks its float and increases its stock price, which often is done solely to avoid delisting from the New York Stock Exchange or Nasdaq. It is not just coincidental that short sellers frequently have used reverse stock splits to short more shares at a higher price, or at least have them on less margin.

24/7 Wall St. is not suggesting that every company with a high stock price needs to announce a split. Yet, some stocks that just look and feel like they could use a stock split, based on history, on the cost of their services and on whether or the company wants its base customers to be shareholders as well, beyond just fractional share ownership.

Many investors could argue that there are another 50 or more companies that should consider stock splits, but here we have focused on those that are more widely traded and very well known. We have not suggested how much of a split should be seen, because every company is different. There is also a dark side of stock splits, which is detailed below.

Here are 13 other companies that should seriously entertain splitting their stocks, and some of these are not just the so-called FAANG stocks and other high-flying tech stocks. These all have considerably higher share prices. Key performance metrics have been included for each, along with some additional color.

Amazon: Up Close to 500% in Five Years

Amazon.com Inc. (NASDAQ: AMZN) was last seen trading at $3,154.42, and its 52-week range is $1,626.03 to $3,344.29. It has a $1.58 trillion market cap. Amazon has traded with a hefty price for some time, and in some ways, it may have pioneered the trend of not wanting to make stock splits. That said, Amazon obviously pays no dividend and the history of splits shows that its stock split twice in 1999 and once in 1998, back before the 2000 dot-com bubble burst.

Alphabet/Google: Up Almost 200% Since 2015

Alphabet Inc. (NASDAQ: GOOGL) was last seen trading at $1,504.35, and its 52-week range is $1,008.87 to $1,587.05. It has a $1.0 trillion market cap. Alphabet effected a split in 2014 with the creation of the dual classes of stock. Sadly, most investors today don’t know which is which. Alphabet pays no dividend and likely will not for the foreseeable future.

24/7 Wall St.
After Tesla’s Stock Split, Who’s Next?

AutoZone Inc. (NYSE: AZO) was last seen trading at $1,189.91, in a 52-week range of $684.91 to $1,274.41 and with a market capitalization of $27.8 billion. AutoZone is a strange situation. A car parts store with a stock price of nearly $1,200 might not tell its customers who come into the store that perhaps they should buy a share of stock for the price of five car batteries. Its last splits were both two-to-one, back in 1994 and 1992.

AutoZone oddly enough pays no dividend, but its history of stockholder returns has been focused on repurchasing its common stock to shrink the float. Even as of October 2019, the company had authorized a total of $23.2 billion in share repurchases since its repurchase program kicked off in 1998.

Booking: Fears of Yesteryear?

Booking Holdings Inc. (NASDAQ: BKNG) was last seen trading at $1,818.95, and its 52-week range is $1,107.29 to $2,094.00. It has a $74.5 billion market cap. One interesting aspect of Booking Holdings is that it effected a reverse split back in 2003 (by one-for-six) because its stock price was so low back then, when it was still known to investors as Priceline.com.

Boston Beer: Up 250% in Five Years

Boston Beer Co. (NYSE: SAM) was last seen trading at $810.16, in a 52-week range of $290.02 to $871.64. It has a $9.9 billion market cap. Boston Beer is another stock for which such a high share price just makes no sense. Many people love to drink their beers and seltzer, but one share of common stock equates to the price of 80 or so six-packs.

Charter Communications: Up 200% in Five Years

Charter Communications Inc. (NASDAQ: CHTR) was last seen trading at $604.14, and its 52-week range is $345.67 to $611.47. Its market cap is $123.8 billion. Charter Communications has the highest price of any cable and media stock. It is now what is left of business combinations with Bright House Networks and Time Warner Cable, now under the Spectrum brand, but those are long enough in the past that there is no reason to have such a high share price.

Chipotle: Under 100% Gain in Five Years, Up 350% Since Peak-Montezuma

Chipotle Mexican Grill Inc. (NYSE: CMG) was last seen trading at $1,167.04, and its 52-week range is $415.00 to $1,193.25. It has a $32.6 billion market cap. It is hard to imagine that Chipotle was spun out of McDonald’s, but its customers tend to have extremely high loyalty rates. When they type in “CMG Stock” as a search on their smartphones, they probably think, “I can buy one share or pay for my next 100 meals here.”

Equinix: Up 175% in Five Years Riding the Cloud

Equinix Inc. (NASDAQ: EQIX) was last seen trading at $775.86, and its 52-week range is $477.87 to $805.81. It has a $68.7 billion market cap. Equinix is a real estate investment trust involved in data centers, and it has close to a 1.4% dividend yield. Some investors consider it somewhat as an AWS without all of the other Amazon operations. One reason it may not want to split is that the last split on record was a reverse split of one-for-32 back in 2002.

Netflix: Up 300% in Five Years

Netflix Inc. (NASDAQ: NFLX) was last seen trading at $479.28. It has a 52-week range of $252.28 to $575.37 and a $211.4 billion market cap. Customers may think of one share at $480 or so as being close to 50 months of service fees. But in close to 20 years of trading history, Netflix split seven-for-one back in 2015 and two-for-one back in 2004.

NVR: Homebuilder Up Almost 175% in Five Years

NVR Inc. (NYSE: NVR) is now a $4,000 stock, the highest of any homebuilding stock price by a factor of close to 40-to-one. The stock just hit new all-time highs and has doubled from its lows in March. The company is the third-largest homebuilder by market cap, with a $14.5 billion value.

Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) was last seen trading at $613.21, and its 52-week range is $271.37 to $664.64. It has a $65.3 billion market cap. Regeneron is older than many of the large biotechs and came public back in 1991. This company has never paid a dividend, and we found no record of any stock splits. Regeneron has many things going for it, but COVID-19 offers serious hope as well.

Sherwin-Williams: Up 200% in Five Years, Up 900% Since 2010

Sherwin-Williams Co. (NYSE: SHW) was last seen trading at $671.69, and its 52-week range is $325.43 to $673.87. It has a $61.1 billion market cap. Sherwin-Williams sells paint all around the country and is a very well-known company. While it pays a 0.8% dividend yield, the last time it split its shares was back in the 1990s and 1980s.

Shopify: E-Commerce Gain of 3,000% Since IPO

Shopify Inc. (NYSE: SHOP) was last seen trading at $997.59, and its 52-week range is $282.08 to $1,107.92. It has a $119.7 billion market cap. Shopify has become “the next big thing” for businesses, and the company is actually a Canadian company rather than a U.S. one. It has sky-high valuations and pays no dividend, and we have seen no stock splits since its 2015 IPO.

Looking Backward and Forward

These calls for stock splits are not exactly new. We even made some of the same observations in 2015, including about AutoZone, Chipotle, Boston Beer and Sherwin-Williams.

Investors need to know that there are at least some dangers in splitting a stock too much or by too large of a ratio at any given time. General Electric Co. (NYSE: GE) comes to mind. GE is now trading with a rather embarrassing single-digit stock price, and it was even booted out of the Dow.

Berkshire Hathaway Inc. (NYSE: BRK-A) is one name that comes up over and over for a split due to a $300,000-plus share price, but it now has the Berkshire Hathaway Inc. (NYSE: BRK-B) shares that are closer to $212.00. Those were created back in 1996. Warren Buffett had noted back in the 1980s, even at much lower share prices, that he did not intend to split the stock, but those B-shares split 50-to-one in 2010, and now the stock is much more investable by the public.

One modern reverse split that changed how a stock traded was the case of Rite Aid Corp. (NYSE: RAD). The pharmacy chain operator still has only an $820 million market cap, but at $15 this would still be a sub-$1.00 stock had it not conducted a reverse-split of one-for-20 back in 2019. Rite Aid was very actively traded, with tens of millions of shares trading hands each day before that time. The prior history shows five splits that took place in the 1980s and 1990s, before the company ran into trouble in 1998 and suffered a low share price thereafter.

Announcing a stock split is not supposed to change a single fundamental of a company. Still, shareholders love traditional stock splits. To combat high stock prices, there have been recent efforts by Schwab, Fidelity and other services that went so far as to allow for fractional share purchases or slices. Even at $200 and $300, those slices are going to remain popular.

The chart from Ally below shows just how out of favor stock splits from S&P 500 companies had become over the past 15 years. Ally also pointed out that stocks splits were less effective as a stock price booster in recent years, but since 2010 the S&P 500 stocks announcing splits outperformed their benchmark by about 8% on average in the following 12 months.