Investing

Prediction: A Stock Split for Meta Platforms May Be Right Around the Corner

Chris MacDonald

Published: November 26, 2024 9:48 am

Last Updated: November 26, 2024 11:06 am

Meta Platforms (NASDAQ:META) is among the most well-renowned tech companies out there, and has seen some blistering share price appreciation in recent years. Notably, a significant portion of these gains have been driven by the company’s improving fundamentals and increased focus on efficiency. Many attribute the company’s success to CEO Mark Zuckerberg’s laser-like focus on improving efficiency and ramping down spending in various loss-producing parts of the business.

However, the social media giant, which spits off incredible cash flow from its core Facebook, Messenger, WhatsApp, and Instagram businesses, has continued to invest heavily in its long-term vision of becoming an AI leader. This spending has been welcomed by the market. Thus, as long as Meta’s core operations continue to spit off incredible cash flow growth, we could be witnessing a very large moat being built in what could be one of the most profitable growth areas of the market over the long-term. 

That’s what the market is betting on right now. And if that takes place, and the company’s share price continues higher (shares of META stock currently change hands at around $560 per share), I do think a stock split could be around the corner.

Let’s dive into the bull case behind why a stock split could be announced sooner than many investors think.

Key Points About This Article:

• Meta Platforms continues to see its valuation (and share price) skyrocket, leading to expectations that a stock split could be around the corner.
• Let’s dive into the bull case behind why the company may indeed want to split its stock yet again, and what a split may look like.
• 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.

Could a Stock Split Be On the Horizon?

Despite its stock trading near all-time highs, some analysts have suggested that there’s no compelling case (at least in the near-term) for Meta to split its stock. Many companies begin considering splits when their share prices cross over into four-digit territory, which would imply an upside move of around 80% in order for Meta to consider splitting its stock. However, plenty of companies trading above $500 per share have decided to increase their share count to make their stock more affordable and available to the investing public, so I’m not sure this thesis holds too much water right now.

Additionally, given Meta’s incredible year-to-date surge of nearly 60%, the idea that the company can’t or won’t see its shares make a similar move higher in the year to come is one that doesn’t really resonate with me. Again, much of Meta’s recent move is fundamentals-driven. Assuming earnings and cash flows continue to expand at the rate they have (or accelerate further with greater AI adoption), this is a stock that could certainly ride the tailwinds from digital advertising growth much higher from here.

A stock split doesn’t do anything to change a company’s market capitalization or valuation multiples. However, a split does effectively slice the rather large pizza into more slices, making shares more affordable for investors who must buy full shares on certain exchanges, and allows Meta to more accurately issue stock options to employees. Greater liquidity is generally considered to be a good thing, and stocks like Meta have surged in and around stock splits in the past.

Thus, I think it’s entirely possible that a stock split could take place over the course of the next year or two. If Meta’s share price moves toward the $1,000 level, I think calls for a split will really pick up. For now, this is a stock I think is worth keeping on one’s “stock split” radar screen.

Plenty of Optimism Ahead

Meta’s  impressive rally this year has been driven by strong quarterly results highlighting strong long-term growth potential over time. In addition to excellent user growth metrics, ad impressions, ad pricing and profit growth were key factors that have taken the company’s share price consistently higher following recent earnings reports.

Investors will certainly want to pay close attention to incoming earnings reports, and whether Meta can continue to provide the kind of blockbuster results it has thus far in 2024. But with a dominant market share in the social media space, and growing tertiary businesses that are set to spit off cash flow sooner or later, there are plenty of growth drivers for investors to watch closely on the race to a much higher share price.

I think optimism around Meta’s prospects will continue, so long as the company can continue to provide digital advertising growth and strong margins. I have no indication right now to suggest this won’t be the case in 2025, so I think there are fundamental reasons why META stock can ascend much higher from here, assuming the market is willing to assign its current multiple to META stock for the duration of 2025.

Strong Financial Performance Could Drive a Split

Again, I think the story with Meta has been execution. That’s going to be the story in 2025 as well, barring any sort of major macroeconomic shocks or growth scares that inhibit valuations over the medium-term. 

Meta Platforms is a company that continues to press all the right buttons to ensure a steady long-term growth profile, enhancing this company’s allure to investors of all sizes. The company provides among the most resilient and reliable cash flow streams in the market, is sitting on a boat load of cash, and is deploying said cash into high-growth areas of the market which could provide explosive growth over the long-term. This strategy is clearly being rewarded by the market, and I think this trend is likely to continue.

Accordingly, I would not be surprised at the least if Meta announces a stock split next year. Such a move may not be on most investors’ radar, but I think it should be.