Meta Platforms Considers Stock Split as Prices Soar
Companies that split their stock often enjoy strong performance. When a company’s stock price is high, it may deter some investors. Thus, many firms enact splits to make shares more affordable. Historically, this strategy has proven effective for top performers in the market.
Stock Price Signals Possible Change for Meta
As we speculate about a potential stock split for Meta Platforms (NASDAQ: META), it’s useful to observe the actions of its peers. Companies in the “Magnificent Seven,” such as Apple, Microsoft, Alphabet, Amazon, Nvidia, and Tesla, provide relevant examples.
Most of these companies, with the exceptions of Microsoft and Meta, have executed stock splits in recent years. Alphabet and Amazon completed significant 20-for-1 splits in 2022 after their stock prices exceeded $2,000, making shares more accessible at around $100 post-split. This context suggests that Meta might follow suit if its stock price continues to climb.
Looking at Meta’s current trading range near $600 per share, it draws comparisons to Apple, Tesla, and Nvidia’s recent stock split decisions. Apple split its shares in 2020 when the price hit approximately $500. Meanwhile, Tesla completed splits in 2020 and again in 2022, starting from $2,000 and then $840 per share, respectively. Nvidia’s splits occurred in 2021 and in 2024 when shares were valued at $760 and $1,200, respectively.
Given that Meta’s share price is creeping closer to this threshold, speculation around a split is becoming more relevant. With potential growth looming, this could be a timely decision for the company.
Meta’s Impressive Financial Performance
Meta Platforms has been thriving recently. Its Llama generative AI model is seeing extensive use, and its advertising platform is performing robustly. As a result, the company reported a 19% increase in revenue year-over-year in the third quarter, with earnings per share (EPS) climbing 37% to $6.03.
Investors, however, have raised concerns about Meta’s future spending on AI development, particularly with announced capital expenditures for 2025 indicating “significant” growth. Despite this, the company may see big returns if its AI model becomes a leader in the competitive generative AI landscape.
The risk-reward balance for Meta appears favorable; if Meta excels in AI, it could lead to substantial profits. Conversely, if the initiatives do not pan out, the company still holds strong as a cash-generating social media leader. Currently, Meta trades at 29 times its trailing earnings and 20 times its projected earnings for 2025, suggesting a sensible valuation given its growth trajectory.
META PE ratio, data by YCharts; PE = price to earnings.
With such a solid outlook for 2024 and 2025, Meta’s stock price may continue to rise. Should the company show strong performance, the management team might feel encouraged to approve a stock split. Regardless, now presents a strong buying opportunity for investors seeking to add Meta to their portfolio.
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John Mackey, former CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development at Facebook and sister to CEO Mark Zuckerberg, sits on The Motley Fool’s board. Keithen Drury owns shares in Alphabet, Amazon, Meta Platforms, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
