Investors get excited about stock splits for two reasons. First, they make stocks cheaper. That change is entirely cosmetic because the value of the business stays the same, but a lower share price means the stock is accessible to more investors. Second, stock splits can indicate quality businesses because they follow substantial and sustained share price appreciation, which rarely happens by accident.

Indeed, the companies listed below have split their stocks somewhat recently, and all of them possess some sort of competitive advantage.

  • Amazon: 20-for-1 split in June 2022. 
  • Alphabet: 20-for-1 split in July 2022. 
  • Dexcom: 4-for-1 split in June 2022. 
  • Monster Beverage: 2-for-1 split in March 2023. 
  • Nvidia: 4-for-1 split July 2021. 
  • Palo Alto Networks: 3-for-1 split in September 2022. 
  • Shopify (SHOP -0.45%): 10-for-1 split in June 2022. 
  • Tesla (TSLA -1.57%): 3-for-1 split in August 2022. 

Cathie Wood's Ark Invest has a stake in most of these companies. But the innovation-focused investment firm is particularly bullish on Tesla and Shopify. Its positions in those companies account for 7.5% and 2.9% of its portfolio, respectively.

Here's what investors should know about those two growth stocks.

1. Tesla

Tesla missed consensus estimates on the top and bottom lines in the third quarter. Revenue rose just 9% year over year to $23.4 billion, operating margin contracted 964 basis points to 7.6%, and GAAP net income dropped 44% to $1.9 billion. That performance was due in large part to price cuts meant to stimulate demand in a rising interest rate environment, though Cybertruck production and investments in artificial intelligence technologies also contributed to an uptick in operating expenses.

Worse yet, CEO Elon Musk sounded pessimistic on the earnings call. He voiced concern about the economy, warning that demand could deteriorate further if interest rates continued to climb. Musk also tempered expectations on the Cybertruck, telling investors it would take at least 12 months for the electric truck to become a significant source of cash flow.

All of that bad news caused the stock to slip more than 9%, but Tesla bulls should consider that drawdown a buying opportunity. Nothing has changed about the long-term investment thesis. Tesla is still the market leader in battery electric vehicles, and with more autopilot-enabled cars on the road than any peer, the company has a data advantage that theoretically makes it an early leader in the race to build a fully autonomous car.

In July, Musk speculated that Tesla would achieve Level 4 or Level 5 autonomy -- the levels at which cars can navigate without human intervention in most or all circumstances, respectively -- later this year. Tesla also plans to build a robotaxi next year as it prepares to delve into autonomous ride-hailing services, a market that Ark Invest values at $9 trillion by 2030. In time, Musk sees gross profit margin reaching 70% as full self-driving software and ride-hailing services become a bigger part of the business. For context, the company reported a gross profit margin of 17.9% in the most recent quarter.

That narrative may sound farfetched, especially because Musk has made similar predictions in the past that have not panned out. But Wood is not the only Wall Street pundit pounding the table on Tesla. Consider this commentary from Wedbush analyst Dan Ives: "We view Tesla where Apple was in the 2008/2009 period as Cupertino was just starting to monetize its services and golden ecosystem."

Here's the bottom line: Tesla currently trades at 8 times sales, a bargain compared to the three-year average of 15.7 times sales. Investors who believe in the software and services narrative should feel comfortable buying a few shares of Tesla stock today.

2. Shopify

Shopify looked sharp in the second quarter. Revenue increased 31% to $1.7 billion, an acceleration from 16% growth in the prior year, and non-GAAP net income improved to $178 million, up from a loss of $39 million. The company improved its cost structure by selling its capital-intensive fulfillment business to Flexport, now its official logistics partner. That move frees Shopify to invest more heavily in its core competency: software that simplifies commerce.

Indeed, Shopify offers a relatively comprehensive solution for retail. Its software allows merchants to manage sales and inventory across physical and digital storefronts, including online marketplaces, social media, mobile apps, and direct-to-consumer websites. Shopify also provides adjacent solutions for payment processing, expense management, and cross-border commerce, among other services.

That full-stack approach to retail helped the company carve out a strong market presence. Shopify is the second-largest U.S. e-commerce company behind Amazon, and the market leader in e-commerce software. Additionally, its enterprise-grade platform Shopify Plus is the leading omnichannel commerce software, a noteworthy point given that Plus merchants can access tools for digital wholesale, which greatly extends its addressable market.

On that note, retail e-commerce sales are forecast to increase by 8% annually to reach $8 trillion by 2030, and wholesale e-commerce sales are projected to increase by 20% annually to reach $33 trillion during the same period. Morgan Stanley believes those opportunities will allow Shopify to grow revenue at 19% annually over the next decade, and that makes its current valuation of 10.5 times sales look cheap. Long-term investors can buy Shopify stock with confidence.