Shares of tech stock Amazon officially split this week, and there are more stock splits coming. Many fast-growing companies have been deploying stock splits as a way to bring down their prices and thus be more accessible to a wider pool of investors. Stock splits can also generate some excitement around the businesses.
A couple of stocks that would relish the opportunity to benefit from some much-needed excitement include DexCom (DXCM 2.20%) and Alphabet (GOOG +0.48%). Both stocks are going to split soon, and the hope for investors is that it puts them back into the spotlight and sends their shares surging as a result.
Image source: Getty Images.
1. DexCom
Lost in all the excitement about Amazon's stock split is that DexCom is also splitting its shares this week. Last month, shareholders voted in favor of a four-for-one stock split. The split is set to go into effect on June 10 and should bring the price of the stock down to less than $75.
NASDAQ: DXCM
Key Data Points
DexCom, the diabetes company that's known for its continuous glucose monitoring devices, could badly use any kind of catalyst to garner attention to its business. Year to date, its shares have fallen by 45% even though the company remains sound. Investors as a whole have been moving away from growth stocks over the past several months.
DexCom, however, has been one of the worst-performing stocks on the S&P 500 thus far, possibly due to its sky-high price-to-earnings (P/E) multiple that at the start of the year was over 300. The index itself isn't doing well, but at 13%, its losses look mild in comparison to DexCom's.
What's encouraging is that there is starting to be more activity around the stock as its 30-day average volumes have been rising of late:
DXCM 30-Day Average Daily Volume data by YCharts
Although that hasn't coincided with a rising share price, more attention on the stock could inevitably lead to a rally. For a business that has quadrupled its revenue in a span of just four years to $2.5 billion and with more growth on the way as it reaches more people with diabetes, there's tremendous value here over the long run.
A high earnings multiple shouldn't distract investors from the promising opportunities DexCom possesses in the years ahead.
2. Alphabet
Alphabet's drop in value in 2022 hasn't been as bad as DexCom's, but with a loss of 19%, it has also been underperforming the markets as a whole. Concerns about a potential slide in ad spending, along with some less-than-exciting quarterly earnings numbers, have put Alphabet's stock under pressure of late.
NASDAQ: GOOG
Key Data Points
The company behind the popular Google search engine reported revenue of $68 billion for the first three months of the year, which was up 23% year over year -- slower than the 34% growth it achieved in the prior-year period. And ad revenue from its video-hosting platform YouTube fell well short of analyst expectations during the period.
As a result, the stock has been slumping and recently hit a 52-week low of $2,044. And even though the tech stock has rebounded a bit from that level, it still trades at a P/E multiple of 21, which is around its lowest level ever.
GOOG PE Ratio data by YCharts
Alphabet's shareholders recently approved the company's mammoth 20-for-1 split, which won't go into effect until the middle of next month. That gives investors plenty of time to consider whether the stock is a buy before then.
While the spotlight is on Amazon right now, Alphabet's time will come in a month. And if the growth stock keeps on falling, it could be a prime time to load up on its shares, which after the split, could be trading at less than $120.
