Stock Splits vs. Artificial Intelligence: Wall Street’s Latest Buzz
While artificial intelligence (AI) has been commanding attention on Wall Street for some time now, the buzz around companies implementing stock splits has also been a significant driving force for the stock market in 2024.
Stock splits are a strategic tool that publicly traded companies use to adjust their share price and outstanding share count. It’s important to note that while stock splits can alter the appearance of a company’s share price, they have no bearing on its market capitalization or operational performance.
There are two types of stock splits – reverse and forward. Reverse splits are typically undertaken to boost a company’s share price, often to maintain listing on major stock exchanges. On the other hand, forward splits are intended to lower a company’s share price, making it more accessible to retail investors and employees.
Investors generally favor companies that execute forward stock splits, as these are often indicative of strong performance and innovation within their industry. Since the beginning of 2024, numerous exceptional companies have announced or completed stock splits, with the majority being forward splits.
Two companies that have captured significant attention in the stock-split arena are Nvidia and Broadcom. Both companies are leaders in the AI space, and their forward-split actions have drawn considerable interest from investors.
Nvidia, known for its top-tier graphics processing units (GPUs), saw its shares surge by a remarkable 639% since the start of 2023 due to robust demand for its products. The company completed a 10-for-1 forward split in early June, becoming the largest publicly traded company in the process. Similarly, Broadcom, a key provider of AI networking solutions, conducted its first-ever 10-for-1 split in mid-July.
With the spotlight now turning to two new entrants in the stock-split club, all eyes are on Sirius XM Holdings and Cintas this week.
Sirius XM Holdings, a satellite-radio operator, is set to undergo a 1-for-10 reverse stock split following the completion of its merger with Liberty Media’s tracking stock, Liberty Sirius XM Group. This move is aimed at increasing the company’s share price to attract larger institutional investors.
Despite not experiencing rapid growth, Sirius XM boasts unique advantages, such as subscription pricing power and diversified revenue streams. The company’s subscription-based revenue model provides a stable earnings stream that is less susceptible to economic downturns compared to ad-driven radio providers.
Cintas, a leader in corporate uniform and business services, is gearing up for a 4-for-1 stock split after a remarkable run since its IPO. The company’s ability to capitalize on economic cycles and its diverse customer base have been key drivers of its growth. In addition, strategic acquisitions have helped expand Cintas’s product offerings and drive profitability over the years.
As investors await the stock split actions of Sirius XM and Cintas, the market continues to buzz with excitement over the potential opportunities presented by these companies. Stay tuned for more updates on these emerging stock-split stars at Extreme Investor Network.