Investing

A Surprising Stock That Could Be the Next to Split After NVIDIA

Eric Bleeker

Published: June 2, 2024 3:05 pm

The discussion centers around the potential for Netflix (NASDAQ: NFLX) to announce a stock split following the significant market response to NVIDIA’s split. Recently, technology stocks like NVIDIA (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG), and Amazon (NASDAQ: AMZN) have seen considerable increases in share prices following split announcements. Netflix, currently trading at around $650 per share, is an under-the-radar strong candidate to split its shares next. Find out the upside technology companies issuing splits have seen recently, why Netlix could be next, and why 24/7 Wall Street Eric Bleeker believes Netflix is a strong buy at today’s prices.

Why Netflix Could Be the Next Major Tech Company to Split Its Shares

Here are some highlights from 24/7 Wall Street Analysts Eric Bleeker and Austin Smith discussing the potential for Netflix to split its shares.

• On May 22 NVIDIA announced a stock split. That’s a prediction we’d previously made in several articles. 
• The question now, is what technology stock is next?
• A key reason for anticipation around which tech stock splits next is the performance of tech stocks that announced stock splits recently.
• NVIDIA rose 9.3% the next day after announcing its stock split. 
  • Apple rose 10% after its last stock split announcement.
  • Alphabet was up 8% the next day.
  • Amazon was up 5%. 
• One compelling case for the next technology stock split: Netflix. Which, isn’t a stock that’s gotten as much “press” compared to other stock split candidates. 
• Yet, here are the facts. 
  • Netflix is currently trading for around $650 per share.
  • The company last announced a stock split in 2015 – when it was trading for $681 per share.
  • Netflix split 7 for 1 at that time. 
• And now that Netflix is trading back for about the same price, well… That means the stock is up nearly 600% from its last split! 
• Personally, Netflix is one of my top 3 holdings and the reason is quite simple 
• First, over time every tech company becomes an advertising company, and we’re extremely bullish on Netflix’s prospects in that space.
  • Their ad tier is now at 40 million users, which is a jump from 15 million back in November.
  • More importantly, ads now account for 40% of new sign-ups.
• Second, Netflix can determine how quickly they want to push into markets like sports 
  • Right now, they’re experimenting with specials like the Tom Brady roast and have purchased limited NFL rights in addition to rights like the WWE.
  • Netflix will become the everything app, it’s just a question of how quickly they want to push against rivals. This leads us to the final point…
• Third, their competitors are all under extreme pressure. 
  • Both Warner Bros – owner of HBO – and Paramount are under extreme pressure. Warner is in an existential battle for the NBA right now. 
  • Paramount is about to be in a life-and-death battle for the NFL 
  • Disney is under margin pressure as well. 
  • The point: this used to be a market where profits were difficult because every company could burn money, but now few streamers have the luxury.
  • This is an ideal position for Netflix. It has multiple levers to pull. It can balance raising paying rates and moving members to advertising tiers. 
• Overall, we’re bullish on Netflix having the right competitive dynamics to keep growing in streaming and becoming the dominant entertainment app. 
• We believe investors should own this stock, and the potential for a stock split that draws investor enthusiasm is the cherry on the top.

Transcript:

All right, Eric, after NVIDIA announces a 10-for-1 split and the company famously added roughly $500 billion in its market cap following that, of course, every investor, ourselves including, are wondering what stock could split next.

Now, just as a reminder, when a stock splits, it’s not fundamentally changing the valuation of the company, but it can be a sign of confidence from the management team that they do expect shares to continue appreciating, that they’re focusing on retail investors.

So look, after that incredible rally in the wake of the NVIDIA split, everyone wants to know what stock could split next.

So walk us through what’s going on.

Yeah. And I mean, you look at the performance of technology stocks after their splits.

At this point, it’s unavoidable that other companies are going to see what’s going on and want to follow.

You had NVIDIA rising 9.3% the day after its split announcement.

Apple, after its last split announcement, went up 10% the next day.

Alphabet went up 8% after its last split announcement.

Amazon was up 5% after its last split announcement.

So I said on repeat occasions, the most prominent stock that will likely announce a split next, I believe, is Supermicro Computer.

But there are many options.

And here’s a compelling case I don’t see as many people talking about.

I think Netflix has a really great case to split its stock.

And again, it’s not as much in the media, but here are the facts.

Netflix is currently trading for around $650 per share.

The company last announced a stock split in 2015 when it was trading for $681 per share.

So almost the exact same price.

That was a seven-for-one stock split at the time.

And now that Netflix is trading back for that same price, well, that means the stock is up nearly 600% from its last split.

So I know we’re getting a bit jaded by incredible performance, but 600% since 2015 is incredible.

Personally, Netflix is one of my top three holdings.

And the reason is quite simple.

First, over time, every tech company becomes an advertising company.

And I’m personally very bullish about Netflix’s prospects in that space.

Their ad tier is now at 40 million users, which is a jump from 15 million back in November.

More importantly, ads now account for 40% of new signups.

Second, Netflix can determine how quickly they want to push into markets like sports.

Right now, they’re experimenting with specials like the Tom Brady roast, and they purchased NFL rights recently for Christmas Day, and they’ve got the WWE.

I believe Netflix is on the path to becoming the everything app. It’s just a question of how quickly they want to push it.

And also getting so many users in their advertising tier is going to enable far more of the positive economics they’re going to need for sports.

Third, their competitors are in just a bad place right now.

Both Warner Brothers, which owns HBO and Paramount, are under extreme pressure.

Warner’s in an existential battle for NBA rights right now.

Paramount is about to be in its own existential battle to maintain the rights to the NFL.

Disney’s under margin pressures and is pulling back on investments in Disney+.

The point here is this used to be a market where profits were difficult because every company was looking to burn money to gain market share.

And that’s just simply not the case. Competitors don’t have that luxury anymore.

So this is an ideal position for Netflix with multiple levers to pull.

It can raise rates, which might be getting a little bit tougher, but now that rates have reached a point, raising them might be tougher.

They have advertising as, you know, another alternative.

Overall, I’m bullish on Netflix having the right competitive dynamics to keep growing and becoming the dominant entertainment app.

I believe investors should own this stock.

And you know, the potential for a stock split going forward, that’s just kind of the cherry on the top to a story that’s really looking great for the next five years.