Prediction: These 2 companies will split their stocks by 2027

A stock split can stimulate the market even if nothing fundamentally changes for the business, including its future prospects. So what’s the reason behind a rally following a stock split? Once a company’s stock price crosses a certain psychological threshold, the average investor begins to perceive the stock as “expensive” and worries that they cannot buy enough (or even all) of that company’s stock.

When the executive management and board of directors perceive such a loss of interest in the underlying stock, they usually undertake a stock split, thereby generating renewed investor interest because the stock appears more “affordable” after the split, pushing up the stock price.

One way to predict which companies might engage in such a move is to look for companies whose shares are not only trading at relatively high prices, but whose businesses are likely to continue to perform well.

It’s not an exact science, but Eli Lilly (LLY -0.77%) and Regeneron Pharmaceuticals (REG -0.74%) there are two excellent candidates who fit this description.

1. Eli Lilly

As of this writing, Eli Lilly stock is changing hands for about $908 per share. The stock has been in the red for the past few years, up nearly 700% from 2019. If it can maintain this pace — or anywhere close to it — the company could boast a stock price above $2,000 by 2027, which would not be an unacceptable level for a stock split. And while Eli Lilly is already delivering strong financial results, I think things are about to get better.

In the second quarter, Eli Lilly’s revenue rose 36% year over year to $11.3 billion. Excluding one-time revenue from the sale of rights to one of its former drugs in Q2 2023, the company’s top line grew 46% year over year. Eli Lilly’s biggest growth drivers, diabetes treatment Mounjaro and weight loss drug Zepbound, are still flying high. Moreover, the company recently obtained FDA approval for Kisunla, a treatment for Alzheimer’s disease. That’s to say nothing of other newer products, including ulcerative colitis therapy Omvoh and cancer drug Jaypirca, which aren’t contributing significantly to its revenue yet, but should eventually.

Expect Eli Lilly’s financial results to continue to be incredibly strong. The company will also record several clinical and regulatory wins. There has been positive news recently about clinical trials of Tirzepatide — the active ingredient in both Mounjaro and Zepbound — as well as insulin efsitora alfa, Eli Lilly’s experimental once-weekly insulin formulation. Here’s the bottom line: Eli Lilly’s business is firing on all cylinders, and it doesn’t look like that’s about to change. Even if there are hiccups, the share price will remain mostly north for a while.

Eli Lilly has done several stock splits in its history, but its last was in 1997. The company could do it again in three years, but whether it does or not, the stock is a buy.

2. Regeneron

Regeneron has had a stock split, but it might be time to do it. At the time of writing, the company’s stock is changing hands for just under $1,132. Regeneron has also performed incredibly well in recent years, and there’s more to where that came from, especially since its biggest growth driver, eczema treatment Dupixent, is about to get a significant boost .

Regeneron shares the rights to Dupixent based in France Sanofi (NASDAQ: SNY). Last year, the partners reported that the drug had accepted two Phase 3 clinical trials as a treatment for chronic obstructive pulmonary disease (COPD), the first biologic to do so. Dupixent was recently granted a label extension for COPD by the European Union medicines regulator. It should soon have a similar expansion in the US.

Last year, Dupixent was among the 10 highest-grossing drugs in the world, raking in $11.6 billion in sales. It is still gaining ground even without the added COPD indication. In the first six months of 2024, global sales of Dupixent (recorded by Sanofi) rose 26% year-over-year to $6.6 billion. While estimates vary, analysts predict the COPD indication could give Dupixent an additional $3.5-6.5 billion in annual sales and estimate the drug could generate $20 billion in annual revenue by 2026 .

In addition, Regeneron rejected competition (biosimilar and otherwise) from Eylea, its treatment for wet age-related macular degeneration, the rights of which it shares with Bayerdue to the approval of a high-dose formulation of the drug. Combined U.S. sales of Eylea and Eylea HD rose 2% year-over-year in the second quarter to $1.53 billion. Regeneron’s financial results remain solid: Its revenue rose 12% year over year to $3.55 billion in the second quarter.

Biotechnology is also developing newer products, particularly in oncology. And so, barring any overly negative developments, Regeneron should continue to perform solidly, with the stock outperforming the market overall. As a result, its stock should trade significantly above its already high level by 2027. With that in mind, a stock split could be in the cards for this biotech stock.