Investing

Here's Why Altair Will Likely Announce a Stock Split

Joshua Rodriguez

Published: July 3, 2024 11:46 am

Altair (NASDAQ: ALTR) is a software solution company. But that doesn’t begin to describe what the company does. It offers tools that help drive artificial intelligence, simulations, high-quality data analytics, and more. Boeing, BorgWarner, Lockheed Martin, Mahindra, Mercedes-Benz, and Volvo Group all rely on the company’s software and cloud computing services — and they’re just a handful of Altair’s many clients.

The company has seen incredible success. It produced $171.5 million in revenue in the fourth fiscal quarter of 2023, representing a 6.9% year-over-year growth. Profits were up in the quarter too, with net income of $16.5 million. That’s significant growth over the company’s $2 million loss in the fourth fiscal quarter of 2022. And Q3 growth only compliments the company’s upward trajectory. 

Perhaps that’s why the stock has seen such strong growth over the past year. It’s currently up over 30% year over year. And, the strong upward movement could lead to a stock split announcement. Read on to discover why.

Breaking Down the Mechanics of the Stock Split

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Stock splits are typically designed to attract investors. This is ultimately done by increasing the number of shares available, which decreases the price per share. 

For example, say a stock traded at $100 per share and there were 25 million shares available. The company could do a four-for-one stock split, trading four shares for every one share outstanding. In this case, the company would end the stock split with 100 million shares, each worth $25. As you can see, there’s no inherent change in the company’s market cap or the value of consolidated shares. There are simply more shares available at a lower price each. 

In Altair’s case, the company currently has 56.95 million shares outstanding, and the price per share is hovering around $98. If the company did a four-for-one stock split, it would have 227.8 million shares outstanding and the share price would drop to about $24.50. 

So why is Altair likely to make such a move?

Altair Has Seen Strong Price Growth

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As mentioned above, Altair is trading at around $98 per share. But that share price follows significant price growth since its IPO in 2017. The stock has climbed over 7% in the last month — that’s better than some well-known blue-chip stocks, like Coca-Cola (NYSE: KO), have done in the past year. 

And Altair’s year-to-date, annual, and long-term growth have been just as impressive. The stock is up 25.33% year-to-date, 32.99% over the past year, and 142.31% over the past five years. To put that growth into perspective, Altair was trading at just over $40 per share five years ago, Just over $73 per share one year ago, and just over $78 at the start of this year. 

Why This Price Growth Suggests a Stock Split Could Be Ahead

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Although Altair’s share price climbed 140% in the past five years, the company hasn’t gone through a single stock split during this growth. That could price some investors out of investing with the company, especially beginner investors or those with relatively small portfolios.

There are a few reasons investors may be apprehensive about adding a stock with a $100 price tag to their portfolios: 

• Diversification: Most investors should maintain a well-diversified portfolio of a wide range of stocks. That way, when one stock loses value, gains in others make it easy to absorb that loss. But, it gets more difficult to add stocks to a well-diversified portfolio as the prices of those stocks rise. After all, a $100 share will take a larger portfolio allocation than a $10 share. 
• Liquidity: Since investors are often apprehensive about purchasing stocks with higher price tags, liquidity tends to suffer too. After all, once you have a high-cost stock in your portfolio, it can be more difficult to find a buyer when you’re ready to offload it than if the share price was lower. 

If Altair moves forward with a reverse split, it will make the stock more inviting to investors who won’t pay $100 per share. 

Now Is the Perfect Time for a Split

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On June 20, 2024, Altair announced that it had been added to the S&P MidCap 400 index. As a result, all eyes are on the stock and the volume is up. After all, when a stock is added to a new index, it is typically the subject of investments by index funds. But, funds aren’t the only new investors the company may be able to track at the moment. If Altair moves forward with a stock split, it could capitalize on this attention, further increasing volume and potentially attracting new investors into the fray. 

The Bottom Line

Altair hasn’t announced a stock split yet. But all signs point to a potential split on the horizon. If one happens, it could increase volume and attract new investors. So keep an eye on the news as a new opportunity to take advantage of stock split-related growth may emerge soon.