Investing

Is META Stock About to Announce a Stock Split?

Rich Duprey

Published: October 30, 2024 9:35 am

If 2023 was the Year of Artificial Intelligence, will 2024 be remembered as the Year of the Stock Split?

Although they are not at record levels, stock splits are rebounding tremendously. According to a September Wall Street Horizons report, there were 100 stock split announcements in the second quarter, the highest level since the first quarter of 2023 when 101 were announced. And the number continues to grow.

July witnessed 30 stock split announcements, a record for the month in the site’s nine years of data, while August was also above-trend. There were 27 announcements, five more than the historical average. 

There also has been a number of notable stock splits this year as well. Chipotle Mexican Grill (NYSE:CMG) split its shares by a whopping 50-for-1 ratio, Nvidia (NASDAQ:NVDA) split its shares 10-for-1, as did Broadcom (NASDAQ:AVGO).

Indeed, many of the companies splitting their stocks this year did so precisely because of AI’s effect on the market that caused their valuations to rise.

24/7 Wall St. Insights:

• Stock split announcements are back in vogue in 2024 and in recent months are racing ahead of previous record levels.
• Some of the biggest AI-related stocks have announced or completed stock splits this year, setting the stage for a surprise announcement from one particular candidate.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Carving up the pie

However, most investors understand that a stock split is essentially a non-event. Companies raise or lower their share count, which artificially lowers or raises the stock price. The underlying business is unaffected by the split.

Yet they are seen as bullish indicators by the market of additional gains to come. At least for forward splits. That’s where a company increases the shares an investor owns by a specified number, which causes the stock to fall by that rate. 

So in Nvidia’s case, it gave investors nine more shares for every one they owned. They now had 10 shares where before they had just one. But NVDA stock fell by a 10-to-1 ratio. Shares that had been trading at over $1,200 each pre-split were about $120 a stub afterwards. Nothing else about the chipmaker’s business changed.

Reverse splits, on the other hand, are not so good. While the same thing occurs except in reverse — a company reduces the number of shares an investor owns, which raises its stock price — it often signals a company in trouble.

Oftentimes a company’s stock has fallen into penny stock territory and to maintain its exchange listing, it needs to boost the price above a certain threshold to do so. It will perform a reverse stock split to achieve it.

Likewise, nothing about its business is altered. If it was in trouble beforehand, it will remains so after.

A below-the-radar AI powerhouse

Now that we’re one-third of the way through the fourth quarter of 2024, earnings season is in full swing. One stock poised to report its quarterly results could be the next stock to shock the market with a stock-split announcement.

Meta Platforms (NASDAQ:META) releases its third-quarter earnings after the market closes today. Its stock stands at almost $600 a share after going on an eye-watering 555% tear higher from its 2022 lows.

While many companies have seen their business improve because of AI, Meta Platforms is really an under-the-radar winner in the space even as many are aware of its efforts.

The social media platform that owns Facebook, Instagram, and WhatsApp has been doing more than dabble in AI. CEO Mark Zuckerberg has said AI will “revolutionize” ad services. While it uses AI to monitor ads for inappropriate content for its platforms, he also sees it being able to better target audiences and create content for advertisers.

Earlier this week, tech site The Information broke the news Meta was developing an AI search engine in a bid to break free from its reliance upon Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google Search. While Meta had previously revealed it was using web crawlers for “training AI models or improving products,” The Information says it plans to embed the search engine in its Meta AI chatbot.

That’s significant because Meta AI is growing exponentially. Last month Zuckerberg told its developer conference that Meta AI has almost 500 million monthly active users and is one of the most used AI assistants globally. And that’s before it has really debuted in many major markets.

The key takeaway

Meta stock is up 67% so far this year and at nearly $600 a share, it is priced beyond the reach of many small investors. By splitting its stock, the social media platform would make its stock accessible to millions more potential shareholders.

With many of the major companies benefiting from AI having already announced or completed their own stock splits, it might not be so surprising after all to see Meta Platforms join their ranks with its own announcement when it reports its earnings later today.