Stock Splits Surge in 2024, Signaling Potential Market Trends
The financial world is witnessing a resurgence in stock splits, with 2024 recording the highest number of splits since 2013. This trend, often triggered by high stock prices, aims to make shares more accessible to a broader range of investors.
Bank of America analysts note that stock splits typically precede periods of strong market performance. Companies initiate splits to lower entry points for investors by increasing the number of shares while reducing the price per share. A prime example is Nvidia’s recent 10-for-1 split, which saw its share price drop from approximately $1,210 to $121.
Historically, companies undertaking splits have averaged a 67% return in the year leading up to the split. Post-split performance also tends to be robust, with stocks showing an average 25% total return in the 12 months following the announcement.
However, macroeconomic factors can significantly impact post-split performance. The challenging economic landscape of 2022, marked by inflation and Federal Reserve rate hikes, led to underperformance for several high-profile companies that split their stocks, including Amazon, Google, Tesla, and Dexcom.
Looking ahead to 2025, Bank of America has identified potential split candidates among stocks trading above $500 per share. The list spans various sectors, including Consumer Discretionary, Industrials, Information Technology, and Healthcare.
Notable companies on this list include NVR with a 12.5% return over the last 12 months, TransDigm Group at 30.6%, and Netflix, which has seen an impressive 69.2% return. Other standout performers include Meta Platforms at 68.6% and Goldman Sachs Group with a 73% return.
While stock splits do not inherently change a company’s value, they often signal management’s confidence in future growth and can increase liquidity and accessibility for retail investors. As the market continues to evolve, investors will be watching closely to see which companies join the stock split trend and how it impacts their performance in the coming year.
