The latest Nvidia stock splits are all the rage — how to know which one will pay off | Wilnesh News
Stock splits have increased in recent months. Wolfe Research says that while stock splits don’t affect a company’s value, they can contribute to higher or lower stock prices. With that in mind, the company offers a guide to help investors determine whether a stock split is a buying opportunity or a signal to avoid. Artificial intelligence chip maker Nvidia announced a 10-for-1 stock split in its quarterly earnings report on May 22. Dow Jones Industrial Average members Chipotle and Walmart also announced stock splits earlier this year. A stock split does not change the value of an investor’s shares. Instead, it simply lowers the company’s share price and then offsets it through a corresponding increase in the number of shares. For example, splitting a $50 stock in half means an investor would own two shares of a $25 stock instead of one. However, lower stock prices increase ownership opportunities, which can allow more retail investors to participate in stock trading. “Splits are cosmetic, but they can impact stock prices,” Chris Senyek, chief investment strategist at Wolfe, wrote in a note Thursday. “They can make a company’s stock trade against Some retail investors are more attractive and are increasing speculative investments.” The firm studied about 3,000 stock splits in large U.S. companies since 1993 to examine their impact. Senek said that on average, stock splits historically indicate poor future performance, especially for technology and communications companies. This is at least in part because stock splits typically follow a period of outperformance. However, Senek noted that this trend has reversed over the past decade, with spin-off stocks showing slightly improved performance over the medium term. Here are the favorable criteria identified by Senyek: Large market capitalization Higher absolute share price Multiple stock splits in the past “Larger market cap, higher price, and multiple splits are the ‘sweet spot’ for stock split signaling mechanisms,” Senyek Yeck said. “For what it’s worth, the upcoming Nvidia stock split meets the three positive criteria above.” Senyek also suggested that the best time to trade a stock split is one week before the split date to one week after the split date. Here’s a look at some companies that have paid dividends recently, and where analysts think they’ll go next: Old Dominion Freight Line completed a 2-for-1 stock split at the end of March. The trucking company’s market capitalization is $37.2 billion, down 21.1% for the quarter and down nearly 15% year to date. Still, analysts remain bullish on the stock. According to FactSet, they forecast nearly 22% upside potential from current levels. Baird upgraded Old Dominion to “outperform” from “neutral” following its latest quarterly earnings report in early May, advising investors “remain opportunistic buyers” of the stock. Wal-Mart, the largest retailer in the United States, announced a 3-for-1 stock split at the beginning of the year and began post-split trading on February 26. Citigroup named Walmart one of its top picks after the latest earnings season. The company successfully demonstrated that “everything is working together” and highlighted price-to-earnings multiples, multiple expansion, and earnings upside. Shares are up nearly 24% so far this year. The following table lists companies that are about to undergo stock splits: Chipotle will conduct the first stock split by a public company in nearly 20 years in June. Current shareholders will be allotted 50 shares at a ratio of 50 to 1. Chief Financial Officer Jack Hartung told CNBC that Chipotle hopes to increase liquidity for investors and spur employees to invest more. By 2024, the stock has soared 36%. There is also about 5% upside potential. CMG Year-To-Date Mountain Chipotle Stocks to Hold in 2024 In addition to Nvidia, Amphenanol is another tech company set to undergo a stock split in June. The fiber optic connector maker announced a 2-for-1 stock split and will allocate additional shares to investors on June 11. While most analysts covering the Connecticut-based company have a Buy equivalent rating, the average price target implies less than 2% upside from current levels. —CNBC’s Michael Bloom contributed to this report.
