AI Stock Surge: Could This Company's Shares, Up by 300%, Be the Next to Experience a Split?
In the dynamic world of tech stocks, Meta Platforms (META) stands out as the only member of the "Magnificent Seven" yet to perform a stock split. Despite a staggering 300% increase in its share price over the past three years, Meta has not felt the need to make its shares more accessible from a price perspective.
A stock split, as explained, is a corporate action that reduces the price of each individual share. In a 10-for-1 split, for instance, shareholders would find themselves holding 10 shares post-split, but the total value of their holdings would remain unchanged. Companies typically execute stock splits when their shares have reached levels deemed high enough to potentially deter some retail investors, often when prices approach or exceed $1,000. However, Meta's share price, while impressive, has not consistently reached such extreme highs.
Historically, companies like Apple, Nvidia, Amazon, and Alphabet have resorted to stock splits to make their shares more appealing to a broader range of investors. Some tech giants have also used stock splits as a means to maintain a psychologically appealing share price for retail investors who cannot access fractional shares. Meta's management, however, may view its current share price and investor base as sufficient or may be waiting for a more opportune moment.
The demand for AI technology remains robust, as evidenced by the soaring demand seen by AI chip providers such as Nvidia and Advanced Micro Devices. Meta, too, has ventured into AI, developing its own large language model, Llama, which powers features across its apps. This involvement in AI technology could potentially lead to increased interest from investors.
A stock split by Meta could lead to increased investor interest and potentially benefit the company financially. However, whether Meta will eventually join the ranks of other tech giants that have performed stock splits remains to be seen. If Meta's share price continues to climb and affordability for the average investor becomes a concern, a stock split could become a likely consideration.
In the meantime, Meta Platforms (META) continues to dominate the tech landscape, its shares trading for more than $600, making it the most expensive of the "Magnificent Seven." With a Price-to-Earnings (PE) Ratio (Forward) of 26x, Meta is the second-cheapest of the group, offering a balance between affordability and growth potential. As always, investors are advised to conduct thorough research before making any investment decisions.
[1] Investopedia. (2021). Stock Split. Retrieved from https://www.investopedia.com/terms/s/stocksplit.asp [2] Nasdaq. (2021). What Happens in a Stock Split? Retrieved from https://www.nasdaq.com/articles/what-happens-in-a-stock-split-2021-08-09 [3] CNBC. (2021). Why Meta Platforms hasn't split its stock yet. Retrieved from https://www.cnbc.com/2021/08/16/why-meta-platforms-hasnt-split-its-stock-yet.html
- Meta Platforms (META), despite not executing a stock split like others in the tech industry, could potentially consider one if its share price continues to rise and affordability becomes a concern for average investors.
- As Meta Platforms invests in AI technology, similar to companies like Nvidia and Advanced Micro Devices, an increase in investor interest may result, although a stock split is not yet imminent.
- By maintaining a share price of over $600, Meta Platforms is the most expensive of the "Magnificent Seven," but its Price-to-Earnings (PE) Ratio (Forward) of 26x suggests a balance between affordability and growth potential, making it an attractive investment opportunity for some.
