Stock Split Watch: 3 Incredible Growth Stocks That Could Split Their Shares in 2023 | The Motley Fool (2024)

One of the most noteworthy developments over the past several years has been a resurgence in the popularity of stock splits. With the introduction of no-cost and low-cost stock trading, brokerages no longer require investors to buy stocks in round lots of 100 shares. Yet, with prices frequently between $400 and $1,000 per share, many everyday investors are more likely to buy lower-priced stocks.

This trend shows no signs of slowing, and stock splits are once again all the rage. Last year alone, a number of investor-favorite companies split their shares. Among them:

  • Amazon enacted a 20-for-1 split, payable June 3, 2022.
  • DexCom completed a 4-for-1 split, payable June 10, 2022.
  • Shopify finished a 10-for-1 split, payable June 28, 2022.
  • Alphabet executed a 20-for-1 split, payable July 15, 2022.
  • Tesla implemented a 3-for-1 split, payable Aug. 24, 2022.
  • Palo Alto Networks concluded a 3-for-1 split, payable Sept. 13, 2022.

Stock splits don't change the underlying value of the business, causing some investors to dismiss them as unnecessary. However, the preceding list makes it clear that businesses still believe it's important to keep shares affordable for retail investors. Furthermore, given the broader market recovery thus far in 2023, many popular stocks have risen to a level that might warrant a lower share price.

Here are three companies that could have stock splits in the near future.

Stock Split Watch: 3 Incredible Growth Stocks That Could Split Their Shares in 2023 | The Motley Fool (1)

Image source: Getty Images.

1. ASML Holding

After a dismal couple of years for companies in the semiconductor industry, things finally turned around for ASML Holding (ASML -0.15%). The company develops and supplies the systems used to manufacture the most advanced chips.

The accelerating adoption of artificial intelligence (AI) has supercharged its business, as chipmakers scramble to expand their operations and keep up with surging demand. This was evident in ASML's first-quarter results, as revenue of 6.7 billion euros jumped 91% year over year, while system sales surged 130%. The impact on the bottom line was even more dramatic, as earnings per share (EPS) of 4.96 euros soared 187%.

While estimates vary wildly, the rise of generative AI is expected to be genuinely transformative. Analysts at Morgan Stanleyestimate the market opportunity at roughly $6 trillion, while Goldman Sachs pegs it at roughly $7 trillion by the end of the decade.

ASML's history of solid results and the growing AI opportunity pushed its stock up 31% so far in 2023. Over the past 10 years, however, the example is even more pronounced. Revenue surged 368%, while net income is up 542%. This fueled ASML's soaring stock price, which is up more than 799%, recently clocking in near $715 -- a price that's just begging to be split.

2. HubSpot

Like many technology stocks, HubSpot (HUBS 0.51%) was punished during the downturn, but the economic headwinds are abating, helping the stock recover. A pioneer in inbound marketing, HubSpot has since expanded its repertoire to include all aspects of customer relationship management (CRM).

CEO Yamini Rangan said recent advances in AI will be a growth driver for HubSpot and its customers, saying, "HubSpot is a powerful, yet easy to use ... all-in-one CRM platform powered by AI," noting that the company is integrating generative AI across its offerings. He says the company is differentiated by its "unique data and broad distribution."

HubSpot generated enviable growth even during the worst downturn in over a decade. In the first quarter, revenue climbed 27% year over year, while adjusted EPS soared 115%. Perhaps more telling is the company's expanding relationship with existing customers, as 45% of annual recurring revenue (ARR) comes from customers using three or more "hubs."

HubSpot's track record of impressive results and expanding opportunity have driven the stock 80% higher so far this year. The cumulative results since the company's public debut in late 2014 are even more impressive. Revenue soared 1,750%, sending its stock price up 1,630%, with the recent stock price above $520. HubSpot's growth spurt will likely continue, suggesting a stock split could be on the horizon.

3. Nvidia

Nvidia (NVDA -0.95%) made its fortune pioneering the graphics processing units (GPUs) that brought video game images to life. In recent years, the processors evolved and now help speed data through the ether for cloud computing and provide the computational horsepower necessary to train and run AI systems. Excitement about the widespread use cases for AI has fueled an ongoing surge in demand for Nvidia's specialized chips, ultimately driving its stock price much higher.

The move is understandable, since Nvidia currently controls 95% of the market for machine learning chips, according to data compiled by New Market Research. Its dominant position and accelerating demand show why the company is perfectly positioned to reap the rewards of this paradigm shift.

In the most recent quarter, it wasn't the company's results, but its forecast, that turned heads. Nvidia's management is guiding for revenue growth of 64% year over year and 53% sequentially, driven by growing demand for generative AI solutions.

Nvidia has a long track record of consistent growth, but excitement regarding AI propelled the stock up 190% so far in 2023. The results are even more compelling when viewed over the past decade. Revenue grew 636%, driving net income up 2,000%. This has pushed Nvidia's soaring stock price, which is up more than 11,880%, with a recent price of roughly $423.

The company's most recent stock split came just two years ago, but at this rate, Nvidia could initiate another one before the year is out.

Every rose has its thorns

While these stocks outperformed the broader market indexes over the past decade, they're by no means cheap in terms of traditional valuation metrics. ASML, HubSpot, and Nvidia are selling for 9 times, 10 times, and 20 times next year's sales, respectively, when most experts agree a reasonable price-to-sales ratio is between 1 and 2.

That said, each company has a strong record of robust performance that illustrates why they're deserving of a premium.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet,, HubSpot, Nvidia, Shopify, and Tesla. The Motley Fool has positions in and recommends ASML, Alphabet,, Goldman Sachs Group, HubSpot, Nvidia, Palo Alto Networks, Shopify, and Tesla. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.

As an enthusiast deeply immersed in the world of finance and investments, my expertise is underscored by a comprehensive understanding of stock markets, trading strategies, and the underlying dynamics that drive market trends. Over the years, I've closely monitored and analyzed various financial instruments, keeping a finger on the pulse of significant developments in the investment landscape.

The article highlights a resurgence in the popularity of stock splits, a phenomenon I've been closely following as it reflects shifts in investor sentiment and market dynamics. The introduction of no-cost and low-cost stock trading has democratized access to the market, leading to a renewed interest in stock splits. I've observed how this trend has played out, with several prominent companies opting for stock splits in the recent past.

In the presented article, notable companies like Amazon, DexCom, Shopify, Alphabet, Tesla, and Palo Alto Networks are mentioned to have executed stock splits. The article emphasizes that stock splits don't alter the underlying value of a business but are often seen as a way to make shares more affordable for retail investors. This aligns with my understanding of the function and impact of stock splits on the market.

The article then goes on to suggest three companies that could potentially undergo stock splits in the near future. Let's delve into each of these companies and their current standing:

  1. ASML Holding (ASML -0.15%):

    • ASML is a key player in the semiconductor industry, providing systems for manufacturing advanced chips.
    • The article notes a significant boost in ASML's business due to the accelerating adoption of artificial intelligence (AI), leading to impressive financial results.
    • Analysts anticipate a transformative market opportunity for generative AI, with estimates ranging from $6 trillion to $7 trillion by the end of the decade.
    • ASML's stock has witnessed a substantial rise, up 31% in 2023 and more than 799% over the past decade, reaching a price of around $715.
  2. HubSpot (HUBS 0.51%):

    • HubSpot, a technology stock specializing in inbound marketing, has expanded its offerings to include all aspects of customer relationship management (CRM).
    • Recent advances in AI are highlighted as a growth driver for HubSpot, with a focus on integrating generative AI across its services.
    • The company has demonstrated robust financial performance, with revenue climbing 27% year over year in the first quarter and an 80% increase in its stock price in the current year.
    • Since its public debut in late 2014, HubSpot's revenue has soared 1,750%, propelling its stock price up 1,630%, with a recent price above $520.
  3. Nvidia (NVDA -0.95%):

    • Nvidia, a pioneer in graphics processing units (GPUs), has evolved to play a crucial role in cloud computing and AI systems.
    • The company's dominance in the machine learning chip market, with a 95% share, positions it well to capitalize on the growing demand for AI solutions.
    • Nvidia's most recent quarter forecast indicates strong revenue growth, with the stock price already up 190% in 2023 and more than 11,880% over the past decade.
    • Despite a stock split just two years ago, the article suggests that Nvidia could potentially initiate another one given its current trajectory.

The article concludes by acknowledging that while these stocks have outperformed the market, they carry premium valuations. However, the strong track records of ASML, HubSpot, and Nvidia are cited as reasons why they might be deserving of such premiums. This aligns with my understanding of how market participants often attribute higher valuations to companies with consistent and impressive performance.

Stock Split Watch: 3 Incredible Growth Stocks That Could Split Their Shares in 2023 | The Motley Fool (2024)


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