When Walmart (NYSE:WMT) announced its 3-for-1 stock split, the market took notice. It was a move that hadn’t been seen from the retail giant in over two decades, instantly tripling shareholders’ stock count while keeping the market cap steady. This strategic decision not only grabbed headlines but also sparked conversations about which companies might be next in line for similar announcements in 2024.
A stock split, for those new to the concept, is when a company divides its existing shares into multiple ones to increase share liquidity. While this multiplies the number of shares available, it doesn’t change the company’s overall valuation; it simply makes each share more affordable and, therefore, more accessible to a wider pool of investors. It’s a tactic often employed to attract more shareholders, including making the stock more attainable for company employees, as was the case with Walmart.
Given Walmart’s bold move, the spotlight now turns to other high-flying stocks that could benefit from making their shares more accessible. The three companies highlighted below are prime candidates for stock splits in the coming year, each with its own compelling reason for potentially following Walmart’s lead.
Broadcom (NASDAQ:AVGO)
Broadcom stands out as a prime candidate for a stock split in 2024, potentially following in the footsteps of tech giants like Amazon and Alphabet, which made similar moves two years ago. With its share price hovering just under $1,350, Broadcom is perfectly positioned for a split. The stock has seen an impressive rally, climbing 135% in the past year and an astonishing 412% over the last five years. This growth trajectory mirrors the original Broadcom, which experienced three stock splits since its inception in 1991 before being acquired by Avago in 2016. Despite the change in ownership, the company retained the Broadcom name and ticker symbol but has not split its shares since the acquisition.
Broadcom’s aggressive expansion strategy, marked by significant acquisitions in the software sector—including notable names like CA, Symantec, and Brocade—underscores its ambition. The recent completion of its VMWare acquisition last November further solidifies its position in the tech landscape. The company’s focus on network and server solutions optimized for artificial intelligence (AI), coupled with its development of AI chips, positions it at the forefront of this rapidly growing sector. With AI-related revenues hitting $1.5 billion last quarter, Broadcom’s influence in the tech world is undeniable.
As Broadcom edges closer to trillion-dollar status, a stock split seems like a logical step to enhance accessibility for investors. Making AVGO stock more attainable could broaden its appeal and potentially fuel further growth, making it a stock to watch closely in 2024.
Microsoft (NASDAQ:MSFT)
Microsoft, a name synonymous with innovation and resilience in the tech world, is currently trading at a relatively approachable $404 per share. Despite being the most affordable of the trio we’re spotlighting, whispers of a potential stock split are growing louder. With a history of nine splits, the last one dating way back to 2003, the idea isn’t far-fetched. Since its last split, MSFT has seen an astronomical growth of 1,560%, and when you factor in reinvested dividends, the total return skyrockets to nearly 2,600%—a stark contrast to the broad market index’s 812% total return.
The recent second-quarter earnings report only adds fuel to the speculative fire. Microsoft announced an 18% increase in sales from the previous year, reaching $62 billion, largely thanks to the integration of AI across its product range and services. CEO Satya Nadella highlighted that half of the Fortune 500 companies are now utilizing Microsoft’s Azure AI models, with the cloud services platform boasting 53,000 AI customers. This isn’t just growth; it’s a testament to Microsoft’s deepening footprint in the AI and cloud computing arenas.
Sitting at the pinnacle of the market with a $3.1 trillion valuation, Microsoft’s financial health is nothing short of robust. With $81 billion in cash reserves and a 33% increase in profits from the previous year, reaching $22 billion, Microsoft is a juggernaut powering through the tech sector. Whether or not a stock split is on the horizon, MSFT’s performance is a beacon for investors seeking a blend of stability and explosive growth potential in their portfolios.
Ulta Beauty (NASDAQ:ULTA)
At a glance, Ulta Beauty’s current share price of $551 might seem steep, but this powerhouse in the personal care and cosmetics industry is showing all the signs of being ripe for a stock split. As the largest specialty beauty retailer in the U.S., with a sprawling network of nearly 1,375 stores across all 50 states, Ulta has carved out a significant niche for itself in the retail sector.
The company’s approach to shareholder value is notably aggressive, focusing on share repurchases over dividends. Following its fiscal third-quarter report, Ulta announced an increase in its share buyback program to $950 million, up from the previously planned $900 million. This move underscores the company’s robust financial health and its commitment to enhancing shareholder value. A stock split could further democratize ULTA stock, making it as accessible as the beauty products lining its shelves.
The beauty industry is known for its resilience, often thriving regardless of the economic climate. This phenomenon, known as the Lipstick Effect, highlights how consumers gravitate towards smaller luxuries, like beauty products, even in tougher times. Ulta Beauty stands at the intersection of this enduring demand, offering an array of affordable luxuries to consumers.
Since going public in 2007, Ulta Beauty has delivered staggering returns of over 1,603%, dwarfing the S&P 500’s 239% return in the same period. Lowering its stock price through a split could open the doors to a broader investor base, eager to partake in the company’s continued growth story. With its solid track record and strategic positioning, Ulta Beauty is not just selling beauty products; it’s offering investors a chance to own a piece of a resilient and flourishing business.
