After Nvidia’s Stock Split Announcement, Are Adobe, Alphabet And Amazon Next?

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Nvidia (NVDA) stock rallied by almost 10% over the last week, after the company announced its first stock split in almost two decades. The stock is expected to trade on a split-adjusted basis from July 20. Now it’s looking quite likely that we will see more high-profile stock splits this year, considering that the S&P 500 is up a solid 80% from the lows of March 2020, with many large-cap stocks trading around their all-time highs. In our indicative theme of  Stocks Poised For A Split, we’ve identified a group of over ten companies from the S&P 500 with a strong track record of revenue growth, with their stocks also trading at high prices, potentially making them candidates for a stock split. Now although splits don’t change the fundamentals for a company, they typically cause a run-up in the stock price post-announcement as investors see them as a signal that management is confident that growth will remain strong going forward. Below is a bit more about some of the companies and why they’ve been outperforming.

Alphabet (GOOG) is up by about 40% year-to-date and by about 70% over the last 12 months, as the company’s core advertising business held up despite Covid-19, while the cloud business continued to gain traction, with sales rising 46% year-over-year in 2020. The company carried out its first and only stock split in 2014 and the stock trades at over $2,400 presently.

Amazon (AMZN) stock gained about 30% over the last 12 months, as revenue growth accelerated led by its e-commerce and cloud businesses which both saw demand surge through Covid-19. Amazon carried out its last split around two decades ago and currently trades at around $3,200 per share.

Adobe (ADBE) stock has rallied by about 30% over the last 12 months, as the shift toward digitization and cloud offerings proved beneficial to the company through Covid-19. The company carried out its last stock split in 2005, and its stock now trades at a little over $500 per share.

[4/27/2021] Stock Split Candidates

The S&P 500 is up a solid 45% over the last year and many large-cap stocks are now trading near all-time highs. In our indicative theme of Stocks Poised For A Split, we’ve identified a group of over ten companies from the S&P 500 that are growing revenue quickly and consistently, with their stocks trading at high prices, potentially making them candidates for a stock split. Now, although splits don’t change the fundamental picture for a company, they typically cause a run-up in the stock price post-announcement as investors see them as a signal that management is confident that growth will remain strong going forward. Stocks in our theme include Amazon (AMZN), Alphabet (GOOG), and Netflix (NFLX). Below is a bit more about these companies and how they’ve been faring recently.

Amazon (AMZN) stock has gained about 5% year-to-date and about 44% over the last 12 months, as revenue growth accelerated over the last year led by the e-commerce and Amazon Web Services businesses which saw demand surge through Covid-19. Amazon stock saw its last split about two decades ago and currently trades at around $3,150 per share. There is speculation that a split could be announced this year, potentially as early as Thursday when the company reports Q1 results. [1]

Alphabet (GOOG) is up by about 18% year-to-date and by about 80% over the last 12 months, as the company’s core advertising business held up despite Covid-19, while its cloud business continued to gain traction. The company carried out its first and only stock split in 2014. The stock trades at over $2,300 presently.

Netflix (NFLX) stock has gained about 21% over the last 12 months, although it has declined by about -6% year-to-date. Although the stock appears to have lost some momentum, on account of weaker than expected Q1 subscriber figures, the longer-term outlook for Netflix is strong, as the company expects to generate positive free cash flows for every year after 2021. (Related: Will Netflix Become A Cash Machine?)  Netflix has seen two stock splits in the past, the most recent being in 2015.

See our theme on Stocks Poised For A Split for a complete list of companies and the criteria we’ve used to pick stocks.

[Updated 12/3/2020] Stock Split Candidates

With the big market rally this year, many stocks are trading at around all-time highs. Considering this, high-profile stock splits have made a comeback, with  Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) splitting their shares in late August. These splits have helped to drive prices higher, for perspective Tesla stock has soared by almost 2x since its five for one split was announced. Although splits don’t change the fundamentals of a company, investors see them as a sign that growth could remain strong going forward. In our indicative theme of  Stocks Poised For A Split, we’ve identified a group of large-cap companies in the S&P 500 that trade at above $500 per share, have seen strong revenue growth and significant price appreciation this year, making them prime candidates for future stock splits. While our last update in September included Nvidia (NVDA)Amazon (AMZN)Alphabet (GOOG) , and Intuitive Surgical (ISRG), names that have been added include Align Technology (ALGN)Netflix (NFLX), and Charter Communications (CHTR). Below is a bit more about these companies and why they’ve been outperforming.

Align Technology is a company best known for its Invisalign dental aligners. The company has fared well despite the Covid-19 pandemic, with its Q3 2020 sales soaring by about 24.9% versus last year. Investors have also been cheering the company’s quick international expansion, with Invisalign shipments outside the U.S growing 34% last quarter. [1] The stock trades at about $504.

Netflix stock has also had a solid run, rising by over 50% year-to-date, as the company added about 28 million subscribers over the first nine months of this year, as people avoided public forms of entertainment and stayed home through the Covid-19 pandemic. Netflix also appears confident about its pricing power, despite the launch of lower-priced services such as Disney+ and Apple TV+, as it raised pricing on its popular tier in the U.S in late October.

Charter Communications, a major telecommunications provider, has seen its stock rise by 36% year-to-date driven by robust growth in Internet subscribers as the work and learn from home trend accelerated through the Coronavirus pandemic. Interestingly, the company also added cable TV customers over the last two quarters, defying the broader trend of cord-cutting.

[Updated 9/17/2020] Stock Split Candidates

Stock splits are back in favor this year, with Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) splitting their shares late last month. Although splits don’t change the fundamentals of a company, they often cause a run-up in the stock price post-announcement as investors see them as a signal that growth could remain strong going forward. In our indicative theme of  Stocks Poised For A Split we’ve identified a group of large-cap companies in the S&P 500 that have seen strong growth and price appreciation that could be prime candidates for a future stock split. The theme has returned about 37% year-to-date, versus 5% for the S&P 500. It remains up 113% since 12/31/2017  vs. 27% for the S&P. Below is a bit more about the companies in our theme.

Nvidia (NVDA): The maker of graphic processing units (GPUs) has seen its stock soar over 110% this year, driven by growing demand from data centers and its recent deal to buy chip designer ARM. The stock trades at a little over $500 and saw its last split about two decades ago.

Amazon (AMZN) also saw its last split about two decades ago and currently trades at around $3,080. The stock is up by 67% year-to-date, as the Covid-19 pandemic caused demand for its e-commerce and cloud services business to surge.

Intuitive Surgical (ISRG) a company that develops products for robotic surgeries carried out its last stock split in 2017. The stock trades at about $690 currently and is up by about 17% year-to-date.

Chipotle Mexican Grill (CMG) stock trades at over $1,260 presently and the company hasn’t done any splits to date. The stock is up by about 51% year-to-date.

Alphabet (GOOG) Google’s parent company carried out its first and only stock split in 2014 and the stock trades at over $1,500 presently. The stock is up by around 13% year-to-date.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

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Notes:
  1. Seeking Alpha []
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