The stock market has seen a surge in 2024, with major indices reaching record highs. This increase has been driven by factors such as the rise of artificial intelligence and significant political events.
A stock split allows a company to adjust its share price and outstanding share count without affecting its overall market capitalization or operational performance. There are two types of stock splits: forward and reverse. Forward splits aim to lower a company's share price, making it more accessible to retail investors. Reverse splits are typically used by struggling companies to boost their share price. Forward stock splits have gained traction, particularly among innovative companies, and have been linked to outperformance in the stock market.
Meta Platforms, the parent company of social media giants like Facebook, Instagram, and WhatsApp, is one company that may announce a stock split in 2025. Currently, Meta's share price is around $620, and it is the only member of the "Magnificent Seven" that has not split its shares. The company's substantial revenue, primarily from advertising, positions it well for a forward split, which could attract more retail investors. Meta's advertising revenue has been strong, with $116.1 billion in sales reported through the first nine months of 2024. The company has a significant cash reserve of $70.9 billion and a net cash flow of $63.3 billion from operations, allowing for aggressive investments in future growth.
Another company that may announce a stock split in 2025 is Costco Wholesale, a leading warehouse club. Costco has not split its shares in nearly 25 years, and its share price is approaching $1,000. The company's business model, focused on selling essential goods, has proven resilient regardless of economic fluctuations. Costco's competitive advantage lies in its ability to negotiate better prices for bulk purchases, allowing it to offer lower prices than many competitors. The company's membership-driven model further enhances its profitability.
The stock market's current landscape suggests that 2025 could see significant developments in stock splits. Meta Platforms and Costco Wholesale are leading the charge, and investors will be closely monitoring these companies for any announcements regarding potential stock splits.