Last week, Nvidia (NVDA) announced a highly anticipated stock split. That announcement, coupled with yet another stellar earnings report, helped trigger a rally in NVDA stock that topped $1,000 per share. In this article, we’ll explore which “Magnificent 7” stock could split its shares next after Nvidia.
To begin with, it's important to know that tech companies tend to mimic each other in terms of corporate actions. For instance, both Tesla (TSLA) and Apple (AAPL) split their shares in August 2020, while Amazon (AMZN) and Alphabet (GOOG) both completed stock splits in similar ratios, and in quick succession, in 2022. Notably, during the dot-com boom days of the 1990s, tech companies went overboard with their stock splits amid the stellar rallies.
Big Tech Companies Follow Peers in Corporate Actions
Those stock splits could be directly linked to the price action. Since the shares of Big Tech companies usually move in tandem, so does the trajectory of their stock splits.
And it turns out that even when initiating a dividend, Magnificent 7 companies follow the lead of their peer group.
For instance, in 2024, both Meta Platforms (META) and Alphabet initiated dividends. Chinese tech giant Alibaba (BABA) - known as the “Amazon of China” - also initiated a dividend in late 2023. The question of dividend initiation also popped up during Amazon’s Q1 2024 earnings call, but the company did not provide any timeline.
Companies generally split shares when the stock price rises, and becomes “costly” or “unaffordable” for retail investors. A lower share price helps increase liquidity as more retail traders can then buy the shares.
However, barring an increase in trading volumes, a stock split does not have any impact on a stock’s fundamentals. That said, markets perceive a stock split as a positive, and usually, we'll see a stock go higher on the announcement of a stock split. In a market where sentiments play a part in price action right alongside fundamentals, stock splits are a smart strategy for companies to adopt.
Next Stock Split Candidates
Among the Magnificent 7 constituents, we can rule out a stock split from Tesla for now, as the shares trade at less than half of their 2021 highs. Amazon and Alphabet each did a big 20-for-1 split in 2022, so we can also rule out them doing another one for now. Similarly, Apple’s latest split was as recent as 2020 - and with the stock still below its all-time highs and trading south of $200, a stock split does not look likely for now.
This leaves us with Meta Platforms and Microsoft (MSFT), which I believe are the most likely Mag 7 contenders for a stock split.
Microsoft Has Split Its Shares 9 Times
Microsoft went public in 1986, and has split its shares 9 times. Unsurprisingly, 7 of these came in the 1990s amid the stellar rally in internet shares. The Redmond-based company last split its shares in 2003.
Microsoft shares have since rallied sharply, and at a price level of around $430, it is the second-costliest stock among the Magnificent 7. MSFT has also outflanked Apple to become the biggest company, and now boasts a market cap of around $3.2 trillion. Since Apple dropped out of the $3 trillion club and Nvidia has yet to join, currently Microsoft is the only company globally to command a market cap above $3 trillion.
Given that, I believe Microsoft is one Big Tech company that should consider a stock split to make its shares more appealing and affordable for retail investors.
Meta Platforms is Another Stock Split Candidate
Meta Platforms is the only Magnificent 7 member that has never split its shares. This anomaly can be partially attributed to its relative newcomer status as a publicly traded company, as it only listed in 2012.
That said, Meta has now been listed for over 12 years, and is currently a $1 trillion market cap behemoth. Its stock price is also the highest when compared to other Magnificent 7 stocks. The Mark Zuckerberg-led company has also initiated a dividend this year, and I believe a stock split could be next on its radar as the shares approach $500.
On the date of publication, Mohit Oberoi had a position in: NVDA , AAPL , META , GOOG , BABA , TSLA , MSFT , AMZN . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
