Amidst the whirlwind of financial markets in 2024, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have scaled new highs, marking a grand era of volatility and growth. The journey through this decade has witnessed the spectacle of bear markets giving way to bull markets and back again.
During times of turbulence on Wall Street, a common refuge for both seasoned investors and novices alike has been the stable shores of industry giants. The allure of established businesses with a proven track record of outperformance has drawn investors in, reminiscent of the popularity surge of the “FAANG stocks” in the past decade. However, the recent spotlight has shifted towards companies opting for stock splits.
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The Renaissance of Stock-Split Stocks
Stock splits, a mere cosmetic endeavor, allow companies to adjust their share price and outstanding share count without altering market cap or operational performance. These splits primarily serve to make shares more accessible for investors prohibited from fractional-share transactions or to ensure continued listing on a stock exchange.
While there are a few instances of successful reverse splits like Booking Holdings, the spotlight remains on forward split companies, often high-performers with distinct competitive edges. Noteworthy names such as Nvidia, Alphabet, and even Tesla have delighted investors by joining the stock-split club since mid-2021.
In the unfolding narrative of 2024, two prominent entities have taken the plunge:
Walmart: Tradition Meets Stagnation
In a nostalgic twist, Walmart announced its first split since 1999 in late January, sparking excitement among investors. Walmart’s colossal size has been a bedrock of its success, allowing for bulk purchases and lower operational costs. Its prowess in offering a diverse range of products, especially groceries, has long been a winning formula.
However, post-split exuberance has stretched Walmart’s valuation to 23 times future earnings, posing challenges amid a slowing growth trajectory. With sales expanding by a modest 4.9% in fiscal 2024 and growth projections subdued, Walmart finds itself playing catch-up to inflation rates.
While loyalists may see merit in Walmart’s resilience, astute investors are turning their gaze towards other stock-split stocks offering a more compelling narrative.
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Broadcom: The Semiconductor Sizzler
Enter Broadcom, a semiconductor pioneer that stands in stark contrast to Walmart’s narrative. This tech marvel, priced near $1,339 per share, is riding the AI wave with innovations like the Jericho3-AI chip.
Broadcom’s strategic foothold extends beyond AI, with a solid presence in wireless accessories and networking solutions for 5G. Enhanced digitization in automotive technology and financial services arenas further bolsters Broadcom’s appeal.
Broadcom boasts a forward P/E ratio akin to Walmart’s but stands out with a projected earnings growth rate of 14.4% over the next five years. This places Broadcom’s PEG ratio in a league of its own, showcasing a compelling investment opportunity.
Meta Platforms: Unveiling the Social Media Star
Amidst the stars, Meta Platforms emerges as a promising contender. With a soaring share price above $520, Meta’s digital dominance is anchored in social media behemoth Facebook, boasting billions of monthly active users worldwide.
Powered by renowned social assets, Meta Platforms exudes a magnetic allure. Facebook’s global footprint, with over 3 billion MAUs, underpins Meta’s unfaltering ascent in the digital realm.
With Walmart braving headwinds, investors eye companies like Broadcom and Meta Platforms, heralding a new era of stock-split stocks commanding attention for their potential and performance.
Unveiling the Financial Constellations of Meta Platforms
Meta’s Massive User Base Sweep
Meta’s constellation of exceptionally popular platforms, from WhatsApp to Instagram, Threads, and Facebook Messenger, collectively draws a remarkable Monthly Active Users (MAU) count of 3.98 billion in the fourth quarter. When over half of the world’s adult population frequents at least one of Meta’s owned assets each month, the allure for advertisers is undeniable, giving the company strong ad-pricing power.
Celestial Cash Generation
In the realm of cash generation, Meta shines brightly. In the previous year, the company raked in a staggering $71.1 billion in net cash from its operations. As 2023 drew to a close, Meta boasted $65.4 billion in cash, cash equivalents, and marketable securities. This treasure trove of liquidity bestows Meta with ample financial latitude for strategic acquisitions and cutting-edge innovations.
Steering Towards the Metaverse
Meta Platforms is steering its spacecraft towards becoming a torchbearer in augmented reality (AR) and virtual reality (VR), under the visionary leadership of CEO Mark Zuckerberg. With ambitions to serve as a pivotal gateway to the metaverse, Meta’s investments in the Reality Labs segment, though in their nascent stages, position the company favorably to lead the AR and VR domain in the future.
Stellar Valuation Amidst Retail Giants
Comparing Meta with Walmart unveils an intriguing financial constellation. While Meta’s forward Price/Earnings (P/E) ratio of 21 may not seem like a steal, its projected annualized earnings growth of 26% over the next five years presents a compelling picture. Sporting a Price/Earnings to Growth (PEG) ratio of less than 1, Meta emerges as a potential candidate for undervaluation, promising significant upside for prudent investors.
Exciting Investing Prospects
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Randi Zuckerberg, an instrumental figure and former director with ties to Facebook, and sister to Meta Platforms luminary Mark Zuckerberg, adds her starlight to The Motley Fool’s board of directors. Suzanne Frey, a luminary at Alphabet, also graces The Motley Fool’s board of directors. Noteworthy investor Sean Williams delves into Alphabet and Meta Platforms, while The Motley Fool advocates positions in Alphabet, Booking Holdings, Chipotle Mexican Grill, Meta Platforms, Nvidia, Tesla, and Walmart. Moreover, The Motley Fool commends Broadcom. Adhering to a strict disclosure policy, The Motley Fool unveils its positions and perspectives for enlightened investing.
The perspectives and opinions articulated herein represent the wisdom and musings of the author and not necessarily the stance of Nasdaq, Inc.
