A stock split, in which a company divides its existing stock into more shares, effectively increases Superior shares While maintaining the same Market capitalizationIn the last few years, it was all the rage on Wall Street, according to companies Amazon, NiveaAnd Tesla Participating in frustration.
While stock splits don’t affect a company’s valuation, they can serve a purpose, including attracting more retail investors to buy stock at a discount, which in theory helps increase demand for the stock.
One sector, artificial intelligence (AI), that has experienced a boom in stock prices, is ripe for a stock split, so let’s examine four of them and briefly discuss their long-term outlook.
Aplovin(NASDAQ: APP ) It provides mobile app developers with the technologies and tools to effectively market, monetize and grow their apps. The company uses AI To optimize ad placements and maximize developer revenue.
As of this writing, Aplovin trades at $332 per share, giving it a market capitalization of around $112 billion. Notably, the company has never split its stock since going public in 2021, but has risen more than 400% since then.
Digging into the numbers, it’s easy to understand why inventory has increased. In the third quarter of 2024, Aplovin generated $1.2 billion in revenue, translating to $545 billion in free cash flow, up 39% year-over-year and 182% year-over-year. As a result of the strong quarter, management announced a $2 billion increase in its stock repurchase program, which now totals $2.3 billion. Over the past three years, AppLovin’s outstanding shares have declined 11%, reflecting management’s commitment to increasing shareholder ownership.
ASML container(NASDAQ: ASML) It manufactures the advanced photolithography machines necessary to produce high-performance microchips used in AI technologies and is used to optimize AI’s own processes. The stock, which trades at $750 in 1997 and has a market capitalization of $304 billion, has gone through four stock splits since its initial public offering (IPO) in 1997.
The first three stock splits in ASML’s history were forward splits, but the most recent split in 2007 was an 8-for-9 reverse split. As a result, an investor who bought one share in ASML’s IPO in 1997 would own 10.67 shares today.
As for ASML’s latest results, the company posted revenue of $8.2 billion and net income of $2.3 billion in Q3 2024, up 13.1 percent and 10.7 percent, respectively. In addition, the company has a strong balance sheet with $326.5 million in net cash, which has allowed it to pay consistent dividends since 2013. Because the company pays quarterly in euros, it is subject to fluctuations in the exchange rate for US investors. The most recent dividend totaled $1.64. However, ASML has a relatively low payout ratio of 35.2%, which management has indicated it intends to grow over time.
Meta forums(NASDAQ: META )Former Facebook has never split its stock since its 2012 IPO. Over the past year, the stock has risen more than 60 percent and trades at $615 per share for a market capitalization of nearly $1.6 trillion.
Meta, a social media company driven by advertising revenue, has used AI to improve its services. According to the company, its AI tools empower advertisers to create more effective campaigns. For example, businesses using image generation technology have seen a 7% increase in conversions.
In its most recent quarter, Meta posted $40.6 billion in revenue and $15.7 billion in net income, representing year-over-year growth of 19% and 35%, respectively. With $42.1 billion in net cash, the company is increasingly focused on returning capital to shareholders. In the year Meta will begin paying its first quarterly dividend of $0.50 per share in 2024, yielding 0.32%, down 7.3% over the past three years.
Looking ahead, Meta plans to invest heavily in AI. Management expects capital expenditures to exceed $40 billion by 2025, highlighting AI’s central role in the company’s growth strategy.
Microsoft(NASDAQ: MSFT ) It narrows this list down to the company with the largest investment in AI. Over the past 12 months, it has spent $49.5 billion on capital expenditures and has invested an estimated $13.8 billion in OpenAI since 2019. “AI is fundamentally changing the business applications market as customers shift from legacy applications to AI,” said CEO Satya Nadella. Initial Business Processes.”
In the year Since going public in 1986, Microsoft has paid its stock nine times, with the most recent 2-for-1 dividend occurring in 2003. One share bought on the IPO now represents 288 shares.
In the most recent quarter, Microsoft reported $65.6 billion in revenue and $24.7 billion in net income, representing year-over-year growth of 16 percent and 10.7 percent, respectively. The company’s strong balance sheet of $33.3 billion in net cash supports 20 consecutive years of dividend increases. Microsoft currently pays a quarterly dividend of $0.83, which yields an annual dividend of 0.78%.
It is worth noting that none of these four market-beating stocks have declared a stock dividend. While the prospect of a break-up can be exciting, it’s hardly a compelling reason to invest.
A stock’s long-term success depends on the company’s financial performance, particularly its ability to achieve sustained growth in revenue and profits. These companies have already demonstrated how AI can deliver high returns in both by making excellent choices in the portfolios of long-term investors.
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Randy Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the Motley Fool’s board of directors. John McKee, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the Motley Fool’s board of directors. Colin Brantmeier It has positions in Amazon, Microsoft and Nvidia. The Motley Fool recommends ASML, Amazon, AppLovin, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 calls on Microsoft for $405. The Motley Fool has Disclosure Policy.
