Stock splits have long been cheered by the investing community. After all, this gives retail investors the chance to get back in a stock at a more reasonable share price. You may recall the endless stock splits that were seen in the late 1990s and just after 2000, when so many technology and growth stocks were doubling, then tripling and more in share prices.
Some investors and some corporate managers consider a stock split a mere share price gimmick. The problem is that the public only has so much money. If a stock trades at $400 per share, an order of a traditional 100 shares from a retail investor generates a purchase price of $40,000 to buy the stock. An overwhelming percentage of the U.S. population cannot even come up with $10,000 as an emergency expense, let alone to buy shares as an investment.
It is undeniably a bull market. We have even seen a technical analyst prediction calling for the new all-time highs to continue, taking the S&P 500 up from 1,700 to 2,000, and then a secular bull market rally to over 2,500. If we really are entering the next secular bull market after more than a decade of a bear market, then it only seems logical that companies will want to start splitting their stocks again.
24/7 Wall St. has compiled a list of stocks that really should consider making stock split announcements. Maybe it is a bull market gimmick, but a wave of stock splits from key stocks could reinvigorate the mood and outlook of investors who have grown to have disdain and serious trust issues regarding the stock market.
Our screen deals with companies that have a very high stock price, all well over $100 and $200. All of them should be household names, and they are just about all members of the S&P 500 Index. We also selected stocks that are actively traded and liquid. These companies are all still growing, and some have issued stock splits in the past.
We have included how much it would cost an investor to buy 100 shares. Also included is a backgrounder for each company, and we have added color on each. Each company's stock split history has been included, if applicable.
Amazon.com Inc. (AMZN)
> Cost for 100 shares: $30,000
Amazon.com trades roughly at $300 now, and its 52-week range is $218.18 to $313.62. Its market cap is close to $137 billion, and Jeff Bezos has taken Amazon into almost every single facet of retail consumer products. The company has been a disrupting force for all retail segments as well. Amazon split its stock three different times in the most recent great technology boom and bull market: two for one in 1998, and three for one later in 1998 and lastly two for one in 1999. Its last stock split took shares to the equivalent of about $60 on par with today's price of $300.
Apple Inc. (AAPL)
> Cost for 100 shares: $46,500
Apple was the bull market king until the stock peaked at $705 in 2012. Now the company's lead against technology peers has narrowed, it is dependent on new product excitement, which has been elusive, and the leadership today just does not have the same clout as the great Steve Jobs. With shares trading around $465, Apple's 52-week range is $385.10 to $705.07, and its market cap of $422 billion makes it the largest single public company. Apple is now paying a dividend and is approved for share buybacks, so a dividend split would not be out of line. Apple has even had three different two-for-one stock splits: in 2005, 2000 and 1987. Apple's most recent stock split took its shares to roughly $44 in today's price terms, so it has risen tenfold despite it latest stock price woes. Here is some food for thought: Apple consumers still pay almost the same for one share as they do for many of the company's retail products.
AutoZone Inc. (AZO)
> Cost for 100 shares: $44,000
Does the great auto parts seller named AutoZone remind you of a stock that would trade above $400 per share? With its shares around $440, it has a 52-week trading range of $341.98 to $452.19. This industry leader has a $15.6 billion market capitalization as well. AutoZone has split its stock on a two-for-one basis twice, but back in 1994 and 1992. In today's share price terms, that most recent split was around $27 back then, and that means its stock has risen sixteenfold since then. How many customers going into an AutoZone would think that a stock price of $440 or so seems right? We do not even see a dividend from AutoZone as it reinvests earnings into growth.
BlackRock Inc. (BLK)
> Cost for 100 shares: $28,500
BlackRock is the king of investment management and mutual funds, particularly now that it has the iShares ETF family under its umbrella. It is now larger than Vanguard and Fidelity and claims nearly $3.8 trillion in assets under management. Would a traditional investor want to spend $28,500 for 100 shares of BlackRock stock, or would they rather diversify and take $28,500 to spread among various BlackRock mutual funds and iShares ETFs? Most likely, the latter. BlackRock's $285 share price compares to a 52-week range of $172.41 to $298.14, and its market cap is about $48 billion. BlackRock pays a 2.3% dividend, but we have not seen any stock splits going back to the year 2000.
Chipotle Mexican Grill Inc. (CMG)
> Cost for 100 shares: $40,800
Chipotle has been a serious growth franchise when it comes to fast food and casual dining. Investors could buy 100 shares, or eat a meal there for about 500 days or so and spend the same amount of money. McDonald's had a $100 share price, and Chipotle was spun out from McDonald's before the recession. Chipotle shares have risen handily since 2009, from less than $50 to more than $400 now. It has done this without splitting its stock at all, but how many investors think of a fast-food chain having a $400 share price? The market cap is also about $12.5 billion, so a stock split taking that share price back under $100 might reinvigorate retail investors who feel like they missed the boat.
Google Inc. (GOOG)
> Cost for 100 shares: $90,000
Google has transformed from the king of search into an empire that also includes the king of cheap operating systems. Google has not split its stock price in the past decade since coming public, although Sergey and Larry want absolute control and a share structure that might seem like a price split if carried out. Google's market cap with shares right around $900 is about $300 billion. The company's mantra is to do no evil, but a stock split would not be evil to many shareholders who have missed the boat.
Intuitive Surgical Inc. (ISRG)
> Cost for 100 shares: $39,300
Intuitive Surgical has run into serious problems on its share price of late due to demand issues with the DaVinci robotic surgery system. Now trading at $393, it has a 52-week range of $357.02 to $585.67, and its market cap is still above $15.5 billion. What is so odd about this robotics surgical equipment maker is that its only split was effectively a reverse stock split of one for two that was tied around the completion of its merger with Computer Motion back in 2003. A real stock split here might not cure its demand and product price issues, but it might be just what the doctor ordered for investors who think that the future of robotic surgeries will only grow exponentially in the future.
LinkedIn Corp. (LNKD)
> Cost for 100 shares: $23,200
LinkedIn is supposed to be the social network for professionals, and shares recently hit a new high of $237.96 after strong earnings. It has been public only since 2011 and has never split its stock price. Some investors own LinkedIn under $100 from around its IPO time in 2011, but its market cap is now almost $26 billion. The company does not expect to ever have the same number of users as rival Facebook. How large this can get is anyone's guess, but a $200+ share price against $40 for Facebook might be a mental premium that is just not needed.
MasterCard Inc. (MA)
> Cost for 100 shares: $65,000
MasterCard has grown and grown, despite having come public shortly before the recession. Its stock price was initially less than $50 and then rose to almost $300 before the recession. After pulling back to under $150 in the dog days of the recession, its stock has recovered exponentially and now has hit a new all-time high above $650. All these gains have come without a single stock split announcement, and its market cap is only about two-thirds that of rival Visa. Maybe Visa could use a stock split too, with its shares at $183, but MasterCard's share price of $650 is almost 3.5 times that of Visa's. We just do not see why this needs to have such a high stock price.
Netflix Inc. (NFLX)
> Cost for 100 shares: $25,500
Netflix has millions upon millions of monthly movie and media subscribers, but its stock price has gone back to $255 and is within striking distance again of a high just over $300 from back in 2011. Keep in mind that shares cratered down to about $50 before the last recovery, and a stock split actually might create that next wave of invigoration for shareholders who think Netflix should go to even higher highs. Its market cap is now $15 billion. Netflix did split its stock back in 2004 on a two-for-one basis, but the cost basis back then was in the mid-$30s in today's share price terms.
Priceline.com Inc. (PCLN)
> Cost for 100 shares: $93,500
Priceline has outgrown the old William Shatner ad days and now has morphed beyond just naming your own price for airplane tickets. Its shares recently hit an all-time high of $937, and its 52-week low is all the way down at $553.42. What is amazing here is that its market cap of more than $46 billion is larger than all public U.S.-based airlines combined. Also, Priceline did a reverse stock split on a one-for-six basis back in 2003 after the tech-bubble imploded the stock price. Would management now conduct a stock split that might bring back old bad memories? Certainly its share base has changed in the past 10 years since that reverse split took its stock from $4 at the time magically up to about $25 in today's share price terms. Would a retail investor rather spend $93,500 for 100 shares, or rather bid a maximum of $500 for a plane ticket for enough to buy 187 plane tickets?
Regeneron Pharmaceuticals Inc. (REGN)
> Cost for 100 shares: $25,400
Regeneron had become one of the best-performing biotech and emerging pharmaceutical stocks out there, and it has quietly become the fifth largest U.S. biotech by market cap. Regeneron has grown from treating eye diseases, colorectal cancer and inflammation, and it has larger ambitions with partners Astellas, Bayer and others. Unfortunately, its latest earnings report took away about 6% of its value. That being said, its current $254 share price is against a 52-week range of $132.28 to $283.99, and its market cap is almost $25 billion. Regeneron shares have now risen tenfold since 2010. Regeneron pays no dividend, and we do not see any stock split history going back all the way to the 1990s. What this stock might need is a split to reinvigorate a retail investor base looking for the next biotech growth story. Most biotech stocks did split their stocks historically as their share prices rose and rose.
As a reminder, stock splits do not change company fundamentals. Announcing a split is a corporate governance measure that often is considered the same sort of decision as a dividend or a stock buyback, with the key difference being that no cash is required to change hands. Waves of active stock splits generally are seen in growth stocks, and by nature they are generally products of a bull market.
Imagine how much news it would generate if these 12 stocks decided to split their stocks within a relatively short period. It might create some news excitement for retail investors, and it might even act to increase share buying from the public again. Imagine how high many of these share prices will go to if the S&P 500 really does rise to 2,500 and if these companies never split their stocks.
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