Walmart becomes the latest stock to split today, and these three rising stocks look poised for a split of their own

A new era begins today. Dow Jones Industrial Average. The nearly 128-year-old index not only underwent its 52nd change with the addition of online retailers. Amazon and the abolition of pharmacy chains. walgreens boots alliancehowever, the Dow divisor (the number that helps convert stock prices into Dow points) has changed due to the following reasons: walmart‘s (WMT 0.09%) 3-for-1 stock split.

A “stock split” is an event that allows a listed company to change its stock price and number of outstanding shares by the same amount. The important thing to note about stock splits is that they are purely cosmetic and have no impact on a company’s market capitalization or performance.

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A forward stock split makes a company’s stock price nominally more affordable to retail investors, and is especially useful for investors who cannot purchase fractional shares. A reverse stock split, on the other hand, aims to increase a company’s stock price and ensure its continued listing on a major stock exchange.

Walmart becomes Wall Street’s latest stock to split

Today, Monday, February 26th, Walmart implemented a 3-for-1 split in its futures stock that was first announced on January 30th. Walmart CEO and President Doug McMillon said the reason behind the split was to encourage employees to participate in Walmart’s stock split. Associate Stock Purchase Plan. Mr McMillon said:

Sam Walton believed it was important to keep the stock price within a range where all employees could purchase whole shares rather than fractions. Given the company’s growth and future plans, he felt it was a good time to split the stock and encourage employees to participate over the next few years.

Walmart has been a major beneficiary of above-average inflation over the past two years. Wal-Mart’s deep pockets and ability to buy products in bulk give it cost and product variety advantages that mom-and-pop stores cannot match. Consumers are looking for good deals, and Walmart continues to attract shoppers.

Walmart will join a select group of fewer than a dozen well-known companies that have implemented futures stock splits since mid-2021. But it won’t be the last widely held or well-known publicly traded company to declare a breakup. . Here are his three top-performing stocks that are most likely to follow in Walmart’s footsteps and become the next stock split stock.

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meta platform

After Walmart, the first logical candidate to become Wall Street’s next stock split stock is none other than the social media company. meta platform (meta -0.43%). Meta hasn’t split its stock since going public in 2012, and in less than two weeks, the stock was close to $490.

Meta’s long-term success will depend on three factors. First of all, the company’s social media assets are unparalleled. The company is the parent company of Facebook, the most visited social site in the world, along with Instagram, WhatsApp, Facebook Messenger, and Threads. Combined, Meta’s family of apps brought him just under 4 billion monthly active users in the quarter that ended in December. Having access to this many eyeballs is an advertiser’s dream, which is why meta often has a huge influence on ad pricing.

Second, investors are enraptured by the company’s potential beyond advertising, which includes augmented reality and virtual reality devices, a gateway to the metaverse, and various artificial intelligence (AI) applications. It is included. Even though advertising accounts for nearly 98% of Meta’s total revenue, the growth potential and notable markets for Metaverse and AI are tantalizing.

The third catalyst for Meta has always been its healthy balance sheet. For example, the company ended 2023 with $65.4 billion in cash, cash equivalents, and securities, and generated $71.1 billion in net cash from operating activities last year alone. The company has the luxury of taking chances in terms of innovation that other technology-driven companies cannot match.

Chipotle Mexican Grill

The second rising stock that appears poised for its own stock split is a fast-casual restaurant chain Chipotle Mexican Grill (CMG 0.74%). Since its initial public offering at $22 per share in early 2006, Chipotle stock has soared to $2,725 per share as of about three weeks ago. Its extremely high share price is certainly a deterrent for investors who don’t have access to fractional share purchases.

Chipotle’s secret to success has long revolved around the quality of its food and its innovation. The company tends to rely on locally sourced foods and vegetables, and is committed to using only responsibly sourced meat. What Chipotle executives have discovered is that consumers are willing to pay more when given healthier food options. As a result, Chipotle did not suffer from inflationary pressures.

In addition to the above, the company has kept its menu reasonably small, which has two benefits. First, a smaller menu allows employees to prepare meals more efficiently and move through lines faster. Second, by keeping your menu compact, you can add punch to new product introductions.

But innovation is perhaps the real secret sauce these days. In 2018, the company introduced Chipot Lane, a drive-through lane exclusively for digital order pickup. This further speeds up the ordering process and improves operational efficiency. This is the main reason why Chipotle’s revenue continues to grow by double digits every year.

broadcom

A third high flyer poised to follow in Walmart’s footsteps and join the exclusive club of split-stock stocks is a semiconductor company. broadcom (AVGO -0.65%). Before Avago acquired Broadcom in 2016 and kept the company name, the original Broadcom split its stock three times. However, Avago never implemented a stock split. Earlier this month, a single Broadcom share cost investors as much as $1,295.

Broadcom’s significant outperformance over the broader market since early 2023 has to do with its connection to the AI ​​revolution. In April, the company introduced Jericho3-AI, designed to expand connectivity to its 32,000 graphics processing units in high-computing data centers. Broadcom, which has traditionally enjoyed steady growth, has seen strong sales growth as companies effectively stumble in building AI-enabled data centers to take advantage of AI solutions. I did.

But Broadcom still derives a significant portion of its revenue from wireless chips and accessories designed for next-generation smartphones. The transition to 5G has facilitated a steady replacement cycle for smartphones and other wireless devices, which has proven to be a boon to the company’s bottom line.

Another important factor for Broadcom is that while tech stocks are typically cyclical, it probably has a healthy backlog. As of July 2022, Broadcom had a $31 billion backlog. CEO Hock Tan has not provided a recent update on the company’s order backlog, but overall the spike in order activity around AI suggests it remains strong. . A healthy backlog means reliable and predictable operating cash flow year after year.