Stock splits have become a focal point of interest among investors in recent years, and for good reason. Historically, stock splits are often linked to strong company performance, typically following a period of robust operational and financial results. As companies experience substantial increases in share prices, the need for stock splits arises to make shares more accessible to everyday investors.
Investors are not just drawn by the notion of affordability; there’s a broader narrative at play. Companies that have a solid history of growth tend to maintain their momentum, often delivering market-beating returns. According to data sourced from Bank of America analyst Jared Woodard, companies that announce stock splits see average returns of 25% in the year following the announcement, while the S&P 500 typically gains around 12%.
Here’s a closer look at three recently split stocks that still show promising upside potential, according to Wall Street sentiment.
Netflix: 73% Implied Upside
Netflix has proven to be a solid long-term investment, with shares soaring 782% over the past decade. This impressive gain led to a 10-for-1 stock split last year. Currently, however, Netflix’s stock is approximately 41% below its peak, amid growing concerns regarding its acquisition strategies, particularly regarding assets from Warner Bros. Discovery. Despite this, analysts are largely optimistic. In the latest survey of 44 analysts, 70% recommended it as a buy or strong buy, with an average price target suggesting a 43% upside. Brian Pitz from BMO Capital is more optimistic, giving it a $135 target, indicating potential gains of 73%. The company’s fourth quarter was particularly noteworthy, showcasing a 17% revenue increase to $12 billion, driving a 30% rise in diluted earnings per share.
Booking Holdings: 90% Implied Upside
Booking Holdings, renowned as a top performer over the last 25 years, recently announced a significant 25-for-1 stock split. Despite concerns of a potential downturn in the travel sector, the company’s fourth-quarter results were compelling, with revenue rising 16% year-over-year to $6.3 billion and a remarkable 38% increase in earnings per share to $44.22. Among 39 analysts, 77% rate the stock a buy or strong buy, with an average price target of $5,915, indicating a potential upside of around 45%. Notably, an analyst from HSBC has given a much more bullish target of $7,746, reflecting expectations that Booking is an “undervalued global leader.” Currently, it trades at 24 times earnings, below its three-year average, presenting a buying opportunity for investors.
ServiceNow: 149% Implied Upside
ServiceNow has experienced an impressive 852% increase in stock price over the past decade, despite facing a significant decline of 55% from its peak. The company, known for its SaaS tools that enhance operational efficiencies, recently executed a 5-for-1 stock split. Despite pressures from the AI landscape, ServiceNow’s performance has remained strong. In the fourth quarter, revenues grew 21% year-over-year to $3.53 billion, while adjusted earnings per share rose 24% to $0.92. With 91% of 44 analysts rating the stock as a buy or strong buy, the average price target suggests upside potential of 81%. A particularly bullish assessment from Citizen’s analyst posits a price target of $260, indicating an exceptional upside of 149%. The company’s current valuation stands at 30 times earnings, offering an attractive case for potential investors given its robust growth prospects.
As these stocks demonstrate, stock splits can generate excitement and potential profitability in the markets, making them worth considering for investors looking for the next investment opportunity.
