After Tesla, Amazon, Alphabet, Which Company Could Have a Stock Split Next?

• Many stocks are too expensive for small investors
• Stock splits are trending
• Three possible candidates for future stock splits

At the beginning of February, the Google mother Alphabet surprised with the announcement of a share split as part of its balance sheet presentation. This should be carried out in a ratio of 1:20. A month later, internet giant Amazon also announced that its board of directors had approved a 20-for-1 stock split. This means that Amazon shareholders receive 19 additional papers in their securities account for each share certificate. Tesla followed suit at the end of March. In a statement to the US Securities and Exchange Commission, the electric car pioneer announced that it was planning a stock split, but did not name a split ratio or a possible time.

Stock split for price maintenance

In the case of a stock split, the shareholders receive additional shares, but at the same time the share price is reduced proportionately. Thus, the measure itself does not change the custody account value of an investor, nor does the market capitalization of the company.

However, it is often observed that stock prices rise after the announcement of a stock split. This is due to the fact that once high-priced shares are at least visually cheaper and thus made accessible to a broader group of investors. The hoped-for higher demand from small investors is often anticipated on the stock exchange, which is why the mere announcement of a split often has a direct price-stimulating effect. A stock split is therefore an instrument for price maintenance.

Broadcom

Motley Fool’s Sean Williams believes other companies will follow suit and has identified three candidates he thinks are likely to split. On his list is Broadcom, a designer and provider of semiconductors and infrastructure software solutions. Broadcom’s share price has multiplied in recent years and is now at $592.73 (as of 04/21/2022). Such a course makes it difficult for small investors to invest in the company.

Williams also sees good chances that the price will increase even further in the future. On the one hand, Broadcom is operationally strong, on the other hand, the company has received many orders as a result of the 5G expansion and the problems in the global supply chains. Thus, a stock split would make the stock more affordable and tradable for retail investors.

Costco Wholesale

Sean Williams also believes that a share split is possible at Costco Wholesale in the near future. With a price of 591.74 US dollars (as of April 21, 2022), the wholesale chain’s shares are also relatively expensive for small investors. And like Broadcom, Costco is doing well, so the stock still has upside potential. However, if the company did a stock split and made the paper cheaper, Williams believes that more small investors would certainly buy it.

AutoZone

After all, a stock split would also make a lot of sense for AutoZone, says Sean Williams. The shares of the automotive spare parts dealer were last listed at 2,233.31 US dollars (as of April 21, 2022), a price level that keeps numerous small investors at bay. Not only would a split make the stocks more affordable, it would also increase their daily trading volume, potentially attracting more investors to the stocks.

In addition, AutoZone has made several share buybacks over the past 24 years, reducing the number of outstanding shares from around 150 million to less than 20 million. With so few outstanding shares, however, opportunities for further buybacks are now limited, says Williams. But a stock split would increase the number of shares again, giving more scope for future share buybacks.

Editorial office finanzen.net

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