Bank of America: 3 Stocks to Buy for Future Stock Split Potential
According to Bank of America, several companies are prime candidates for a stock split in the near future, which could lead to shares doubling the average market return, if historical trends are any indication. In recent months, companies have been splitting their stock at a rate not seen in over a decade. More stock splits could be on the horizon, as S&P 500 Index stocks with high share prices above $500 make up 14% of the benchmark index.
Stock Splits: What You Need to Know
If you’re not familiar with stock splits, it’s important to know that they do not fundamentally change anything about a company. A stock split reduces the share price while increasing the total number of outstanding shares, without impacting shareholder equity. However, research indicates that stock splits often signal future outperformance.
Bank of America has identified Netflix, Meta Platforms, and Eli Lilly as potential split candidates based on criteria such as a share price above $500 and historical average returns exceeding those of stocks that split during the same period.
Netflix: A Leading Provider of Entertainment Services
Valued at a market capitalization of $433.7 billion, Netflix is a leading provider of entertainment services, offering TV series, documentaries, feature films, and games across various genres and languages. The company's primary strategy focuses on global expansion through delivering engaging content and enhancing the user experience.
Netflix has demonstrated fundamental strength, with shares surging 81.3% over the past 52 weeks, closing at $1,013.93 last Friday. The company's recent strong performance has increased the likelihood of a stock split. Netflix's ability to increase prices without losing subscribers underscores its strong pricing power.
Meta Platforms: Pioneering Virtual Reality and the Metaverse
With a market cap of $1.81 trillion, Meta Platforms (previously Facebook) is renowned for its social media platforms like Instagram, Threads, and WhatsApp. The company has shifted its focus to becoming a leader in virtual reality (VR) and the metaverse. Meta derives revenue primarily from advertising on its platforms, leveraging its vast user base for targeted advertising opportunities.
Shares of Meta Platforms have rallied 52.2% over the past 52 weeks, closing at $714.52 last Friday. The company recently reported strong earnings, surpassing expectations and reaching over 700 million monthly active users for its MetaAI chatbot.
Analysts' Projections and Valuation
Analysts expect Netflix to see a 23.95% year-over-year increase in GAAP EPS for fiscal 2025 and revenue growth of 13.55% to $44.28 billion. While the stock is considered expensive at current levels, sustained growth and improving margins could justify the premium.
Netflix stock has a consensus "Moderate Buy" rating, with a mean target price of $1,071.89, indicating upside potential. Meta Platforms is also positioned as a potential split candidate, with strong growth prospects and a focus on emerging technologies.
