Amazon recently announced a stock split, its first since 1999. And the stock has been rising, up hundreds of dollars since the company released the news. When there's a stock split, your investment's overall value doesn't change -- only the number of shares and the new share price. The benefit of a stock split is that it can make a high-priced stock feel more accessible, especially to investors who can't or don't want to buy fractional shares.
A stock split also puts a company into the news for positive reasons -- namely that its business is doing well and its share price has risen enough where a split makes sense; you wouldn't expect to see a stock split from a company whose shares are trading at just $100. Tesla and Apple both deployed stock splits last year, and both benefited from a surge in trading activity upon doing so, as the chart shows.
AAPL 30-Day Average Daily Volume data by YCharts
Three other stocks that should consider following suit and split their shares are Regeneron Pharmaceuticals (REGN +2.67%), Costco Wholesale (COST 2.05%), and Shopify (SHOP 2.04%). Their businesses are all solid -- and at a lower price tag, they might attract more investors.
Image source: Getty Images.
1. Regeneron Pharmaceuticals
Regeneron is a stock that's doing well despite receiving some disappointing news earlier this year. In January, the Food and Drug Administration announced it was limiting the use of the company's monoclonal antibody treatment, REGEN-COV, due to its ineffectiveness against the omicron variant of COVID-19. In 2021, that drug generated more than $6 billion in revenue for Regeneron, accounting for 38% of its top line, which totaled $16 billion. However, even when excluding sales from REGEN-COV, the company's revenue still rose by 19% during the year.
NASDAQ: REGN
Key Data Points
And with 11 phase-three trials in its pipeline, Regeneron isn't in danger of running out of growth opportunities. Trading at an incredibly low price-to-earnings multiple of less than 10, the stock is a steal of a deal (the average stock in the Health Care Select Sector SPDR Fund trades at 23 times its profits). Even based on future profits, Regeneron's stock is trading at less than 16 times its earnings.
REGN PE Ratio data by YCharts
Shining some light onto Regeneron and its highly priced stock, which trades at just under $700 right now, could help drive more bullishness behind its business.
2. Costco Wholesale
Costco isn't nearly as cheap of a buy as Regeneron; investors are paying a multiple of 45 times earnings to own a piece of its business. That's relatively high, regardless of which industry you're considering. But one of the reasons investors covet the stock so much is that Costco does well in just about any scenario. In a pandemic, it becomes a one-stop shop for people loading up on day-to-day goods. And in an inflationary environment, it's less vulnerable than a discount retailer or dollar store focused on ultra-cheap goods where it would have to worry about a backlash from raising its prices by a modest amount.
The proof of the company's success is in this chart, as Costco's quarterly revenue has soared by 80% over the past five years. What's even more impressive is that its profits have risen at an even higher rate during that time -- 86%.
COST Revenue (Quarterly) data by YCharts
At over $550, shares of the retailer trade at around all-time highs. A great way to remind investors of how successful Costco has been operating in recent years could be by announcing a stock split.
3. Shopify
If there's one stock that needs some positive news badly, it's Shopify. The e-commerce company went from being a darling on Wall Street that could do no wrong to suddenly being an ultra-risky investment that investors can't seem to stop selling.
The S&P 500 is having a rough time, as it is down 6% year to date, but that's nothing compared to Shopify, which has seen its share price cut in half -- without it even having to do a stock split. But at more than $700, its share price could still be too high for some investors.
When it last reported earnings, Shopify warned investors that its revenue would drop as COVID-19 restrictions loosen around the world and things return to normal. It's not an unfathomable projection given that as people have more options, they might spend less online and more inside brick-and-mortar stores.
However, just the mention of slowing sales growth was enough for investors to push the panic button. Shopify didn't even offer an actual number; it only said that its growth rate would be less this year than the 57% it achieved in 2021. It day say that it would still grow and outpace the growth in e-commerce.
Admittedly, there is some risk around Shopify, especially given its exposure to China, where COVID is a growing problem and case numbers are rising; in January, it announced it would be partnering with Chinese company JD.com, which would make it easier for merchants in the U.S. to sell to China. But COVID didn't derail Shopify's business before, which suggests to me that this bearishness stems from news of a slowdown in sales for the company.
A stock split could help remind investors, along with this chart, of just how strong Shopify's business has been over the years. And with the recent decline, its shares are also trading back to the premiums they were at before the pandemic began.
SHOP PS Ratio data by YCharts
Although growth for Shopify will slow down this year, that doesn't mean it's no longer a top growth stock to own. Analysts from Grand View Research project that the global e-commerce market will continue to grow at a compound annual growth rate of 14.7% until 2027. So a stock split and a a lower share price could be what's needed to generate some excitement around Shopify again.
