The Stock Split Announcement All of Wall Street Is Waiting for Is Back on the Table -- and It's Not Netflix or Costco!

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4 hours ago

Investors typically gravitate toward companies announcing and completing forward stock splits.
Three brand-name, non-tech stocks have completed forward splits in 2025 -- and there's more to picking out which company is next to split than a high share price.
The logical candidate to split its stock next is a cash cow with a sustainable moat whose shares are, once again, within a stone's throw of an all-time high.
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Although the rise of artificial intelligence (AI) has been the premier attention-grabber for investors on Wall Street over the last two-plus years, it's far from the only trend responsible for lifting the broader market to new heights.
Since 2024 began, the market's major stock indexes have been propelled by some of the most influential businesses announcing and completing stock splits.
A stock split allows a publicly traded company the opportunity to cosmetically adjust its share price and outstanding share count by the same factor. These changes are superficial in the sense that they don't affect a company's market cap or in any way impact its underlying operating performance.
Splits can move a company's share price up or down, but there's a sizable variance in how these two types of splits are perceived by the investing community. Reverse splits, which increase a company's share price, are normally shunned by investors. Reverse splits are often enacted by struggling companies that are attempting to avoid being delisted from a major stock exchange.
In comparison, investors typically love public companies that complete forward splits, which are designed to lower a company's share price to make it more nominally affordable for investors who can't buy fractional shares through their brokers. The businesses undertaking forward splits usually have rich histories of recurring profitability.
While three brand-name businesses have taken the plunge and become the latest stock-split stocks this year, the split announcement that all of Wall Street is waiting for is officially back on the table.
Last year, more than a dozen high-profile companies announced a split, and a number of these companies were high-growth AI stocks, including Nvidia, Broadcom, Super Micro Computer, and Palo Alto Networks.
The "Class of 2025" stock-split stocks all come from outside the tech sector.
Wholesale industrial and construction supplies company Fastenal (NASDAQ: FAST) was the first to cross the proverbial finish line by completing a 2-for-1 forward split after the close of trading on May 21. This was the ninth time since Fastenal's initial public offering in 1987 that it's completed a forward split, and it's a clear indication that the company's strong cyclical ties and on-site innovations are helping to strengthen its relationship with core clients.
Following in Fastenal's footsteps was auto parts supplier O'Reilly Automotive (NASDAQ: ORLY), which effected a 15-for-1 forward split after trading ended on June 9. O'Reilly's stock has soared on the heels of a mammoth share-repurchase program that's seen the company buy back close to 60% of its outstanding shares since the start of 2011. O'Reilly's hub-and-spoke distribution model, which ensures that more than 153,000 stock keeping units (SKUs) can reach drivers and mechanics the same day or on an overnight basis, has also been a boon to sales.
The third premier non-tech stock-split stock this year is automated electronic brokerage firm Interactive Brokers Group (NASDAQ: IBKR), which completed its first-ever forward split (4-for-1) after trading wrapped up on June 17. Interactive Brokers' investments in technology and automation, coupled with continued optimistic investor sentiment, have increased aggregate accounts and equity held on its platform, as well as the total number of trades being completed on a quarterly basis.
Aside from forward stock-split stocks (often) out-innovating and out-executing their peers, companies completing forward splits have a knack for outperforming Wall Street's benchmark index, the S&P 500.
Based on an analysis by Bank of America Global Research, since 1980, companies have gained an average of 25.4% in the 12 months following their initial forward split announcement. In comparison, the S&P 500 has averaged an 11.9% increase over these same 12-month periods. This historical outperformance is why investors gravitate toward stock-split stocks and often try to guess which brand-name company will announce a split next.
But keep in mind that there's more to picking out Wall Street's next stock-split stock than locating a company with a high share price.
Some companies with a high share price have demonstrated no interest in conducting a split. For instance, Costco Wholesale's (NASDAQ: COST) board of directors feels confident that its shareholders have access to fractional-share purchasing through online brokers.
Even though its stock is hovering around $975 per share, as of this writing on June 19, Costco's board is in no rush to announce a split. Given Costco's inherent competitive size advantage, as well as its membership-based model that keeps customers loyal to the brand, we're likely to see its share price extend well past $1,000.
The composition of a company's shareholder base matters, too. If an overwhelming percentage of a company's shares are owned by institutional investors, there's not much of an incentive to conduct a split. Money managers aren't in need of a lower share price to purchase stock.
Even though streaming services provider Netflix (NASDAQ: NFLX) is trading more than $500 higher than it was the last time it completed a forward split, less than 20% of the company's shares are owned by non-institutional investors. Despite Netflix's growing streaming subscriber count and $1,200-plus share price, there's no immediate need to conduct a split, given its low retail investor ownership.
While Fastenal, O'Reilly Automotive, and Interactive Brokers making their shares more accessible to everyday investors is a welcome sight, there's another highly influential company that appears primed for a stock split -- and the catch is it's never announced one before.
Whereas every member of the "Magnificent Seven" has completed at least one split since going public, social media titan Meta Platforms (NASDAQ: META) has not. But with its share price rebounding to $700 following the stock market's tariff-induced swoon in April, the possibility of a stock-split announcement is very much back on the table.
Unlike Netflix, more than 27% of Meta's shares are held by everyday investors. This is a large enough percentage that a split would make sense.
A forward split would also be a logical choice, given the strong likelihood of Meta's stock heading even higher.
In March, Meta had an average of 3.43 billion people visiting its family of apps daily. This "family" includes social destinations like Facebook, WhatsApp, Instagram, Threads, and Facebook Messenger, among others. With no other social media destination offering as many eyeballs as Meta, advertisers are willing to pony up a premium to get their message(s) in front of users. More often than not, Meta is going to benefit from its strong ad-pricing power.
Furthermore, CEO Mark Zuckerberg's company is sitting on a mountain of cash. It closed out the first quarter with more than $70 billion in cash, cash equivalents, and marketable securities and is pacing $96 billion in annual run-rate net cash from operations through the first three months of the year. Being a cash cow affords Meta the opportunity to aggressively invest in its AI-driven future, as well as to support its shareholders via a dividend and share buybacks.
Best of all, Meta Platforms' stock remains reasonably inexpensive despite its run-up to nearly $700 per share. A sustained growth rate in the mid-teens, coupled with the company's historically conservative profit forecast, points to its forward price-to-earnings ratio of 24 being a bargain.
Wall Street is waiting for Meta Platforms to take the plunge and become the highlight stock-split stock of 2025. The case for that happening arguably grows stronger with each passing day.
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Bank of America is an advertising partner of Motley Fool Money. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sean Williams has positions in Bank of America and Meta Platforms. The Motley Fool has positions in and recommends Bank of America, Costco Wholesale, Interactive Brokers Group, Meta Platforms, Netflix, and Nvidia. The Motley Fool recommends Broadcom and Palo Alto Networks and recommends the following options: long January 2027 $175 calls on Interactive Brokers Group and short January 2027 $185 calls on Interactive Brokers Group. The Motley Fool has a disclosure policy.
The Stock Split Announcement All of Wall Street Is Waiting for Is Back on the Table -- and It's Not Netflix or Costco! was originally published by The Motley Fool