Bank of America identifies several companies with high share prices as potential candidates for stock splits, suggesting these splits could lead to significant gains for investors. Jared Woodard of Bank of America Securities highlights the recent surge in stock splits, noting that companies are splitting their stock at a pace not seen in over a decade. With 14% of S&P 500 stocks having prices above $500, Woodard predicts that more splits could be on the horizon. Although stock splits don't change a company's fundamental value, they often signal future growth and have historically outperformed the broader market. This article delves into some of the companies identified by Bank of America as potential split candidates, examining their performance and future prospects.
A handful of companies are prime candidates to split their stock in the near future, according to Bank of America, which could allow shares to double the average market return, if history is any guide. Jared Woodard of Bank of America Securities pointed out that companies are splitting their stock at a pace that hasn't been seen in more than ten years in recent months.
And he notes there could be more ahead as S&P 500 stocks with lofty share prices above $500 equates to 14% of the broad market index. To be sure, stock splits do not fundamentally change anything about a company. A stock split cuts the share price (typically in half) and increases the total amount of outstanding shares without altering shareholder equity. However, splitting a stock is typically a signal of future outperformance, Woodard's research shows, and he cited BofA research that implies a return for the shares between 20% and 25% in the next twelve months. That outpaces the average 12% return over the same time period for the broader market, Woodard noted. 'I think stock splits in some ways are kind of a triumph for democracy, because they make a successful company available to a broader base of shareholders,' Woodard told CNBC's 'The Exchange' on Tuesday. 'Whatever the short-term noise might be, historically stock splits are a sign of strength for a company.' Here's a look at some of the stocks BofA pegged as split candidates, which the firm identified through the following criteria: Share price is above $500 Shares have notched a higher historical average return over a one-year to five-year timeframe compared to stocks that split in that same period. The firm reasons that strong recent returns makes it more likely for the stock to split. Streaming giant Netflix made the list. The stock closed at $994.87, which puts it well above BofA's $500 per share criteria. Shares have advanced 77% over the past year. The company hasn't had any issue flexing its muscles and showing off its fundamental strength. Netflix's most recent quarterly results saw the firm notch another beat on the top and bottom line, while boasting 300 million paid memberships. Netflix also raised its full-year revenue outlook. NFLX 1Y mountain Netflix stock. Average analyst price targets compiled by FactSet calls for about 8% upside moving forward. Meta Platforms also made the list. Stock in the Facebook-parent company has surged about 53% over the past year, and closed at $700.49 on Tuesday. The company is coming off of a fourth-quarter beat on the top and bottom line, where Meta boasted a 21% jump in sales year-over-year. Meta also noted more than 700 million monthly active users for its MetaAI chatbot. META 1Y mountain Meta Platforms stock. Price targets from analysts polled by FactSet signal about 7% upside ahead for Meta stock. Another notable name on the list includes Eli Lilly, maker of the Zepbound weight loss drug.
STOCK SPLITS INVESTING BANK OF AMERICA MARKET TRENDS COMPANY PERFORMANCE NETFLIX META PLATFORMS ELI LILLY
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