Prognosis: The Distinctive Wall Street Member of the "Magnificent Seven" is Forecasted to Emerge as the Most Sought-after Stock-Split Stock in 2025
As the year 2024 draws to a close in just a few days, it's likely to go down as another stellar year for Wall Street and investors. As of the market close on Dec. 23, the timeless Dow Jones Industrial Average, influential S&P 500, and dynamic Nasdaq Composite have respective gains of 14%, 25%, and 32% for the year-to-date.
There's no dearth of triggers propelling Wall Street's main stock indexes to new peaks, such as the surge of artificial intelligence (AI), remarkable corporate earnings, and Donald Trump's November victory. It's worth noting that the Dow, S&P 500, and Nasdaq Composite all surged higher during Trump's initial term in the White House.
However, Wall Street's unsung hero that significantly encouraged the 2024 bull market rally could very well be the enthusiasm around stock splits.
Investors are attracted to stock-split stocks
A stock split is a tactic that enables publicly traded companies to alter their share price and outstanding share count by the same factor. It's essential to bear in mind that adjusting a company's share price and share count by the same magnitude doesn't impact its market cap or underlying operational performance.
While stock splits come in two forms, investors generally favour businesses undertaking forward splits in 2024. A forward split cuts a company's share price, usually aiming to make shares more affordably priced for investors who can't purchase fractional shares via their broker.
High-performing businesses conducting forward splits historically have surpassed Wall Street benchmarks. According to an analysis from Bank of America Global Research, forward-split stocks have averaged a 25.4% return in the 12 months following their announcement since 1980, surpassing the S&P 500's more modest 11.9% return over the same period.
In 2024, over a dozen prominent companies carried out stock splits, including rapid growers in the AI sector like Nvidia, Broadcom, and Super Micro Computer. But what investors are mostly curious about is which stock is ripe for a split and set to attract Wall Street's focus in 2025.
The answer might be right in front of you within the highly popular "Magnificent Seven."
This unrelenting Magnificent Seven member could make stock-split history in 2025
The "Magnificent Seven" refers to seven of Wall Street's largest and most influential publicly traded companies. The seven components, ranked by descending market cap, are:
- Apple
- Nvidia
- Microsoft
- Alphabet
- Amazon
- Meta Platforms (-1.95%)
- Tesla
These companies share many similarities. They've all outperformed Wall Street's major stock indexes over extended periods and possess sustainable competitive advantages in their respective industries.
However, one component of this seven stands out as truly unique, particularly when it comes to carrying out stock splits. I'm talking about social media behemoth Meta Platforms, which is the sole Magnificent Seven member that's never executed a split.
At the market close on Dec. 23, Meta's shares were closing in on $600, having already surpassed that threshold just two weeks earlier. Without a split, investors without fractional-share purchasing capabilities through their broker may find it challenging to invest in the company behind the leading social media site, Facebook.
Meta Platforms stock is likely to climb higher, making a stock split a priority in the new year
One of the prominent reasons for announcing stock splits is a steadily climbing share price. Based on Meta's competitive advantages and financial health, all signs suggest this Mag-7 member is poised for another fantastic year in 2025.
Despite the attention on Meta's AI and metaverse ambitions, it's essential not to overlook its dominance in the social media arena. During the September-ended quarter, the company's family of apps, which includes Facebook, Instagram, WhatsApp, Facebook Messenger, and Threads, attracted 3.29 billion daily active users. No other social platform comes close to drawing this many users daily, resulting in Meta's exceptional pricing power for ads. Nearly 98% of Meta's revenue currently originates from ads.
Meta also has a history on its side. While ad spending tends to be highly cyclical, the U.S. economy spends a disproportionate amount of time expanding, relative to contracting. Since the end of World War II, all 12 recessions have resolved within two to 18 months. Conversely, two periods of growth have lasted beyond 10 years. The nonlinearity of economic cycles helps drive ad spending.
Another reason Meta stock is thriving is its status as a cash cow. It closed out September with $70.9 billion in cash, cash equivalents, and marketable securities, and has generated $63.3 billion in operating cash flow through the first nine months of 2024. It's one of very few publicly traded companies with the financial resources to invest in high-growth initiatives due to its superior balance sheet.
These "risks" allow it to aggressively invest in the AI revolution - Meta is purchasing 350,000 H100 ("Hopper") graphics processing units from Nvidia for approximately $10.5 billion - and position the company to serve as a gateway to the metaverse in the latter half of this decade.
Meta Platforms' valuation alignment ought to be acknowledged as well-justified. Unlike Apple, which is assessed at its highest trailing-12-month earnings multiple in a decade, and Nvidia achieving a price-to-sales ratio of 40 during summer, Meta Platforms trades at under 24 times future earnings for the upcoming year. The affordability of this multiple stems from its projected EPS growth rate surpassing a compound annual rate of over 21% until 2027.
Meta Platforms is primed to steal the spotlight as Wall Street's highly sought-after stock-split stock in 2025.
In the context of the given text, here are 2 sentences that contain the words 'money', 'investing', and 'finance':
- Many investors are actively seeking out companies undertaking forward splits, as historically, these stocks have shown a strong performance, often outperforming Wall Street benchmarks such as the S&P 500, due to the increased affordability of shares for a larger pool of investors.
- Given Meta Platforms' dominant position in the social media arena, strong financial health, and expected growth, some analysts are speculating that the company may consider a stock split in 2025, attracting more 'money' from investors looking for high-potential stocks in the Finance sector.
