There's little question that the past several months have tested the mettle of even the most seasoned investors. The S&P 500 and the Nasdaq Composite have both fallen headlong into correction territory. Even worse, the tech-heavy Nasdaq is trading in bear market territory, down almost 27% from its November high, while the S&P remains perilously close, down about 15.3%.
A number of recently split or about-to-split stocks have followed the markets lower, creating several compelling opportunities. A stock split doesn't change the underlying fundamentals of a business, so that alone isn't a reason to buy the stock. However, the underlying business momentum that fueled the share price gains -- eventually leading to a stock split -- is typically a good indicator of future success.
With that in mind, let's look at three stock-split companies that deserve notice.
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1. Apple
Apple (AAPL -0.57%) stunned investors in mid-2020 when the company announced a 4-for-1 stock split, the first in almost six years. In the nearly two years since, Apple has continued to fire on all cylinders, but the recent bear market has dragged the stock down more than 22% off its recent highs.
The company's recent results suggest that once the market's current tantrum is over, Apple's stock will go on to new heights. In its fiscal second quarter (ended March 26), Apple posted a March quarter revenue record of $97.3 billion, up 9% year over year. At the same time, the company set all-time revenue records for its services segment, and March quarter records for the iPhone, the Mac, and its wearables, home, and accessories segments.
Then there's Apple's rock-solid balance sheet, with more than $72 billion in net cash. The company also boasts enviable profit margins of nearly 26%, and its healthy bottom line is fueling its ever-growing dividend, which has risen by more than 143% since 2012. Apple also boasts a payout ratio of less than 15%, securing its dividend even during the harshest market turbulence.
2. The Trade Desk
The Trade Desk (TTD 0.85%) broke with tradition in mid-2021, announcing its first-ever stock split. The 10-for-1 split took place in June 2021, and since then the company has maintained its position as the industry leader with its cutting-edge programmatic ad-tech platform. You wouldn't know it based on the stock price, which has cratered 62% in recent months, even as its business has reached new heights.
Earlier this month, The Trade Desk reported its first-quarter results, which were robust by any measure. Revenue of $315 million grew 43% year over year. At the same time, its adjusted net income of $105 million surged 50%.
We've seen this movie before. At the start of the pandemic, The Trade Desk stock tumbled 49% in less than four weeks, as investors fretted that marketing budgets would be slashed due to the economic uncertainty. When it became clear that the sky wasn't falling, The Trade Desk stock came roaring back, gaining more than 550% by November 2021. Fear is back, driving shares downward again, giving savvy investors the opportunity to pick up The Trade Desk stock for a song.
3. Alphabet
Alphabet (GOOGL 0.35%) (GOOG 0.37%) broke an eight-year dry spell earlier this year when the search giant announced a 20-for-1 stock split that is scheduled for July 5, 2022. Google is the undisputed search leader, with a massive 92% share of the worldwide market. Yet its stock has slumped more than 28% since its November high, as investors worry that a recession is on the horizon.
Yet Alphabet's results tell the tale of a resilient business. In the first quarter, revenue of $68 billion jumped 23% year over year, while its operating income of $20.1 billion climbed 22%. Its search dominance aside, Google Cloud is generating impressive growth, up 44%. Additionally, the company boasts no fewer than nine products with more than 1 billion users: Chrome, Android, Gmail, Google Drive, Google Maps, Google Search, Photos, the Google Play Store, and YouTube.
Google is also the undisputed leader in digital advertising, controlling about 29% of global digital ad spending. While a recession might represent a temporary stumbling block for this tech titan, the secular trend toward digital advertising shows no signs of slowing. That makes Alphabet a stock to buy and hold, even as the market plunges.
