Stock-Split Watch: Is Meta Platforms Next?

Booking Holdings (BKNG +5.34%), the stock that has long been one of the top candidates for a stock split, just made the move. In the fourth-quarter earnings report, released Feb. 18, the online travel company announced that it was doing a 25-for-1 stock split in April.

Investors have been waiting for a while for this to happen, as Booking’s share price had soared to over $5,700 per share last summer. It has fallen sharply since then, but it is still trading at more than $4,000 per share.

Image source: Getty Images.

The 25-for-1 split means that one share will be split into 25 on April 2. So, that means investors who own one share at $4,000 as of April 2 will have 25 shares worth about $160 per share.

One of the reasons that companies initiate stock splits is to bring down the entry price of the stock so that it is accessible to more investors. Often, but not always, it leads to a surge in the stock price, potentially before and after the split. That’s because investors want to buy beforehand to take advantage of the split and get the additional shares.

Expand

NASDAQ: BKNG

Booking Holdings

Today’s Change

(5.34%) $206.71

Current Price

$4077.54

Key Data Points

Market Cap

$123B

Day’s Range

$3884.19 - $4077.54

52wk Range

$3765.45 - $5839.41

Volume

19K

Avg Vol

325K

Gross Margin

97.15%

Dividend Yield

0.99%

Investors may also buy afterward to get a stock at a lower price that may have been out of reach in the past.

Now that Booking is finally splitting its stock, who’s next?

Meta is a prime candidate

Of the “Magnificent Seven” stocks, only Meta Platforms (META +0.48%) has not yet split its stock since it went public in 2012.

The stock price is nowhere near Booking, hovering around $650 per share, but it is by far the most expensive, in terms of entry price, of all of the Magnificent Seven stocks. It is even higher-priced than the next seven or eight largest companies, except for Eli Lilly, another prime split candidate trading at over $1,000 per share.

Expand

NASDAQ: META

Meta Platforms

Today’s Change

(0.48%) $3.07

Current Price

$640.32

Key Data Points

Market Cap

$1.6T

Day’s Range

$628.98 - $641.09

52wk Range

$479.80 - $796.25

Volume

480K

Avg Vol

16M

Gross Margin

82.00%

Dividend Yield

0.33%

Meta may not have had a huge incentive to split the past few years because the stock had been doing so well. It has a three-year annualized return of 55%, which is better than any Magnificent Seven stock over that stretch other than Nvidia.

Meta will be significantly increasing its operating expenses and capital expenditures to ramp up its artificial intelligence (AI) capabilities. This has some investors concerned about the return on investment, especially considering the struggles it has had making its Reality Labs virtual reality business profitable. Will the AI spending be successful, or won’t it? It could also potentially be a drag on earnings.

However, most analysts see the investments as necessary for future growth. Plus, Meta stock is still a good value, trading at just 21 times earnings. It is a big reason why analysts remain bullish. Meta stock has a median price target of $850 per share over the next 12 months, which would suggest a 33% return.

If Meta stock keeps churning higher toward $800 per share, it would seem like a great time to split the price. It would make it more accessible to more investors and show confidence in its AI spending and future growth prospects.