There's little argument that 2022 was among the most challenging in recent history for investors, but this year has been a different story entirely. After tumbling roughly 35% in 2022 -- its worst performance since 2008 -- the Nasdaq Composite has sprinted ahead, gaining 44% so far in 2023 (as of market close on Wednesday).
Yet there's precedent that the good times will continue. Since 1972 -- the first full year of activity for the Nasdaq -- in each year following a recovery, the tech-focused index has climbed 19% on average, which suggests the market will continue to gain ground in 2024.
Furthermore, the renewed interest in stock splits has investors taking a fresh look at companies that have split their shares in recent years, as this is historically preceded by years of robust growth. Let's look at two companies that meet this criterion and should be on investors' short lists.
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1. Shopify
One longtime winner that should be on investors' radars is Shopify (SHOP 1.11%). The stock has gained 2,970% over the past decade, causing the company to initiate a 10-for-1 stock split in mid-2022. Despite the macroeconomic headwinds of the past couple of years, Shopify has a history of vigorous financial growth, and 2024 will likely be no different.
The biggest challenge in 2022 was the rapid and precipitous decline in digital retail, which impacted nearly all companies in the space. But the industry appears to have turned the corner. After a lull caused by the downturn, e-commerce spending is expected to accelerate from $3 trillion in 2023 to $5 trillion by 2028, a compound annual growth rate of 10%, according to Statista. As the leading provider of software-as-a-service (SaaS) tools for online merchants, Shopify will likely gain more than its fair share of the rebound in online consumer spending.
Shopify is also doing its part to help online sellers harness the power of generative AI. The company introduced a suite of AI-powered seller tools dubbed Shopify Magic. This includes creating "high-quality, compelling product descriptions" that can be ready in seconds, saving time and helping boost sales; Sidekick, an AI-enabled digital assistant that helps merchants tap into all the tools Shopify has to offer; and automatic text generation tools to accelerate many mundane and time-consuming tasks.
A rebound in consumer spending will no doubt translate to higher e-commerce sales. As the leading provider of digital retail solutions to an estimated 1.7 million merchants worldwide, Shopify will likely ride this wave higher.
2. Tesla
Another stock-split stock investors should watch closely is Tesla (TSLA -1.11%). The stock has surged 2,450% over the past decade, causing the company to initiate not one, but two stock splits in recent years. Tesla completed a 5-for-1 stock split in mid-2020 and a 3-for-1 split in mid-2022.
The stock has soared in 2023, up 108%, but that tells only part of the story. Over the past three years, Tesla is up just 16% and remains 38% off its peak, bogged down by macroeconomic headwinds, including decades-high inflation and the Federal Reserve's campaign of rising interest rates. While higher rates help tamp down inflation, they discourage consumers from making high-ticket purchases, including Tesla's electric vehicles (EVs). Despite those headwinds, the evidence suggests the company has a long road ahead.
For example, last year, Tesla achieved something that many would have believed impossible just a few short years ago. In 2023, the Model Y -- the company's most popular model -- became the world's best-selling car. That marked the first EV to ever achieve this accolade, according to automotive industry publication GreenCars.
While the final tally isn't in yet, Tesla is expected to sell 1.8 million cars this year, which would represent growth of about 38%. While that falls short of the company's long-term production goals of 50%, it's impressive nonetheless, especially considering the headwinds that have buffeted the economy over the past couple of years. Furthermore, with economic conditions stabilizing, it's unlikely we'll see a repeat of the price cuts Tesla used last year to boost vehicle sales. This, in turn, could boost margins, which will drive fair-weather investors back into Tesla stock.
Given the improving economic conditions and its industry-leading position, Tesla will likely ride a broader tech rally in 2024.
