2 stocks split into stocks to buy before rising 50% and 112%, according to certain Wall Street analysts (hint: not Nvidia)

Stock splits are popular among investors. They make stocks more accessible and can also highlight quality stocks. This is because splits are only necessary after substantial and sustained share price appreciation, which itself is often indicative of a company with strong financials and compelling growth prospects.

Nvidia (NASDAQ: NVDA) is an excellent example. The Wall Street Journal has described the chipmaker as “almost invincible” because it possesses a sustainable competitive advantage that encompasses superior hardware and a robust suite of supporting software. Nvidia shares have surged 780% since January 2023 amid unprecedented demand for AI processors.

The company restored its rising stock price with a 10-for-1 stock split in June, its second split in three years. And Wall Street remains bullish. The stock has a 12-month median price target of $144 per share, implying a 12% upside from the current share price of $128. But some analysts see more upside in two other split stocks.

• Broadcom (NASDAQ: AVGO) announced a 10-for-1 stock split in June 2024 and executed the split in July 2024. Rosenblatt Securities’ Hans Mosesmann recently raised his price target to $240 per share, implying a 50% upside from the price current stock price of $160.

• Celsius (NASDAQ: CELH) announced a 3-for-1 stock split in November 2023 and executed the split in the same month. Gerald Pascarelli of Wedbush Securities recently lowered his price target from $85 per share to $83 per share, but the new estimate still implies a 112% upside to the stock’s current price of $39.

Here’s what investors should know about Broadcom and Celsius.

Broadcom: 50% with an implied benefit

Broadcom specializes in semiconductors and infrastructure software. It is the market leader in data center networking chips and application-specific integrated circuits (ASICs), custom silicon built for specialized use cases such as artificial intelligence (AI). For example, Broadcom helps Alphabetof Google and Meta platforms designs custom AI processors and recently won a third major customer that Reuters identified as TikTok parent ByteDance.

Broadcom is also the market leader in virtualization software thanks to its acquisition of VMware last year. Virtualization allows companies to manage and use IT infrastructure more efficiently by dividing physical hardware into multiple virtual systems. By doing so, a single physical server can run multiple operating systems and applications simultaneously.

Since the acquisition, Broadcom has simplified the VMware portfolio, reducing product SKUs from 8,000 to four core offerings. The company is also transitioning all virtualization products to a subscription model. Going forward, Broadcom is focusing on customer sales with VMware Cloud Foundation, a hyperconverged infrastructure (HCI) solution that brings together compute, storage and virtualized networking. Forrester Research last year recognized VMware as a leader in the HCI market.

The story continues

Broadcom reported strong financial results in the second quarter, beating expectations on the top and bottom lines. Revenue rose 43% to $12.5 billion on strong demand for VMware’s AI infrastructure and virtualization products. Revenue rose 12% excluding VMware’s contribution. Meanwhile, non-GAAP net income rose 20% to $1.10 per diluted share.

Going forward, Wall Street analysts expect adjusted earnings per share to grow 24% annually through fiscal 2025 (ending October 2025). This consensus estimate makes the current valuation of 36.9 times adjusted earnings look relatively reasonable. From that price, Broadcom could return 50% over the next 12 months, but investors buying shares today should have at least a three-year term.

Celsius: 112% default up

Celsius develops and sells energy drinks through major retail channels in the United States. It has achieved strong brand recognition in its core geography and the company is using this momentum to expand globally. It began selling products in the United Kingdom, Ireland and Canada in the first half of 2024, and sales are expected to begin in Australia, New Zealand and France in the second half of 2024.

Celsius is the third most popular energy drink in the United States. The company gained 139 basis points of market share over the past year. Meanwhile, top brands Red Bull and Monster DrinkMonster Energy gained 37 basis points and lost 134 basis points during the same period. Simply put, Celsius is gaining ground at the top of the industry.

The company achieved this success by marketing its drinks as “the better-for-you, sugar-free alternative to traditional energy drinks.” Celsius has thermogenic properties, meaning it increases metabolism and increases body temperature. It is clinically proven to increase calorie burning during exercise, so the brand is popular in gyms and fitness centers.

Celsius reported record financial results in the second quarter. Revenue increased 23% to $402 million, gross margin increased 320 basis points and GAAP net income increased 65% to $0.28 per diluted share. CEO John Fieldly told analysts, “We believe we are well positioned to capture dollar share in the incremental category.”

However, Wall Street expects the company’s earnings to grow 15% annually through 2026. That estimate makes the current valuation of 39 times earnings look pretty expensive. So, I doubt Celsius can deliver triple-digit returns over the next year, and I’d keep the stock on my watchlist for now.

Should you invest $1,000 in Broadcom right now?

Before buying Broadcom stock, consider the following:

The Motley Fool Stock Advisor the analyst team has just identified what they think they are 10 best stocks for investors to buy now… and Broadcom was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $786,169!*

Stock advisor provides investors with an easy-to-follow blueprint for success, including portfolio construction guidance, regular updates from analysts, and two new stock picks every month. The Stock advisor the service has more than four times return of the S&P 500 since 2002*.

See the 10 stocks »

*The stock advisor returns starting August 26, 2024

Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Suzanne Frey, chief executive at Alphabet, is a member of the Motley Fool’s board of directors. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Celsius, Meta Platforms and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

2 Dividend Stocks to Buy Before Rising 50% and 112%, According to Certain Wall Street Analysts (Hint: Not Nvidia) was originally published by The Motley Fool