Is This Unstoppable AI Stock The Next Big Stock Split?

Stock splits are all the rage this summer, with several high-profile companies choosing to execute the move. Nvidia probably got the most attention because it was the hottest stock on the market long before the split, but other big names like Chipotle and Broadcom joined in the fun.

Why? Share sharing, in this case redirect stock split, happens when a company’s stock price reaches a level that makes it difficult to buy a significant portion of the market. In other words, it’s too expensive for the average Joe. The company issues more shares to shareholders and proportionally reduces the price at which each share trades.

So in the end, you have more stocks, but the total value of all your investments hasn’t changed because stocks cost less. However, even if the value in theory does not change, most of the time a forward split is followed by a positive movement in the share price. They tend to be good news for investors.

So who could be next? Well, it’s impossible to know for sure, but there’s one artificial intelligence (AI) company that I think might split its stock sooner rather than later.

The meta is enjoying huge gains after delivering a lot

It is far from its beginnings as “Facebook”, Meta platforms (META 0.35%) has evolved dramatically over the years to the global social media powerhouse it is today. With 3.27 billion daily active users, Meta is embedded in the lives of a significant part of the world.

The company just released monster earnings for Q2 2024, beating Wall Street’s already healthy expectations. The company posted 22% year-over-year revenue growth and a staggering 73% increase in earnings per share.

A lot of different factors came into play. The company is much leaner these days, following layoffs over the past year that have reduced headcount and overhead. Revenue growth, however, comes from the continued growth of Meta’s user base and the frequency and price of its ads. The entire outcome of the Meta is driven by advertising, at least at this point. CEO Mark Zuckerberg continues to double down on his metaverse game — we’ll see how that plays out. The company ran 10% more ads while charging 10% more for the service.

Advertisers love Meta Apps because the people who use them are highly engaged. Furthermore, Meta has started to incorporate AI into its algorithms, serving ads in an even more efficient way and providing more targeted content to users who continue to use its apps.

Meta’s stock looks ripe for a split

When the earnings were released, the company’s stock rose nearly 5% the next day and another 8% since then. Now at around $530 a share, it is the most expensive stock by price in the Magnificent Seven. It is also the only one that has yet to split its stock.

There is no set price at which companies decide to pull the trigger. Nvidia stock was trading around $1,200 when it split; Alphabet‘s was trading around $2,700. Some companies do it for a much lower price, though. Last time Apple split its stock, it was trading at just $500. The Meta’s current $530 is more than enough to justify a split, and given the popularity of the move lately, I think there’s a solid chance it will happen in the near future.

However, a stock split is not a reason to buy a stock. Meta’s fundamentals make it a stock you should have in your portfolio. It consistently delivers where it’s due while investing money in the future. And even if Zuckerberg’s vision of the metaverse doesn’t come to fruition, the company is still in a strong position to succeed.