Investors are keenly observing the market trends, especially after Chipotle’s recent announcement of a 50-for-1 stock split scheduled for June. This news led to a surge in the restaurant chain’s shares by over 5% on the following Wednesday. It’s worth noting that stocks that have previously announced splits have generally performed well in the subsequent months. A prime example is Amazon, which saw a roughly 4% increase in the three months following its 2022 announcement.
Stock splitting is essentially a strategy to make a company’s shares more affordable without altering the business’s value. For instance, after a 2-for-1 stock split, a holder of one share of a $20 stock now possesses two shares of a $10 stock.
Potential Candidates for Stock Splits after Chipotle
Using the CNBC Pro Stock Screener tool, CNBC identified companies with high share prices that could potentially split their stock next. Interestingly, Chipotle emerged as a potential candidate even before the board’s decision was announced. The criteria used for this screening included: shares priced above $500 each, stocks that have doubled the broad market’s return over the past 12 months, shares within 10% of their 52-week high, and stocks in the S & P 500.
While stock splits don’t change anything other than the price per share and the number of shares outstanding, history shows a stock can get a temporary lift afterward from increased accessibility. For instance, individual investors are better able to hold a round lot of 100 or 500 shares of a lower-priced stock than 1 or 5 shares of a higher-priced stock.
Companies Considering Stock Splits
Chipmaker and top artificial intelligence player Nvidia made the cut, with shares having soared nearly 79% in 2024 alone. The stock is roughly 8% below from its 52-week high of $974 reached on March 8. Nvidia’s Chief Executive Jensen Huang mentioned at its GTC Conference that the company would consider splitting its stock in the future. Nvidia has a history of such moves, having made a 4-to-1 split in July of 2021.
Netflix, the dominant streaming platform, has also split in the past, the most recent one being a 7-to-1 split in June of 2015. Shares have added nearly 28% in 2024, and are currently just 1% below what would be a fresh 52-week high. JPMorgan reiterated a positive outlook on Netflix, adding that it’s well-positioned to boost revenue growth. The stock is also only about 12% below its all-time high reached in November of 2021.
