News of a stock split can raise interest in a company, even though it really doesn't have any significant impact on the underlying investment. But whether it makes a real impact or not is beside the point because stock splits normally create buzz around a stock.
One stock that might be feeling left out these days is Meta Platforms (META 3.77%), formerly known as Facebook, which hasn't done a split yet. But the social media company has seen its share price rise significantly since 2023 and is now trading at more than $500 per share. Is a split likely coming this year?
NASDAQ: META
Key Data Points
Meta is no stranger to jumping on the hype
Whether it's copying new features from its rivals, getting in on the excitement surrounding artificial intelligence (AI) by launching its own assistant, or trying to create its own cryptocurrency, Meta often likes to join the crowd. Deploying a stock split would appear to be par for the course, should the company decide to follow suit on that as well.
After all, it's also the only company in the "Magnificent Seven" that hasn't yet done a stock split. Microsoft hasn't done one recently, but it has deployed multiple splits in its history.
Now that Meta's price is around $500, it's at a high enough price for a split to be feasible, with the shares still trading at a fairly reasonable price afterward. Here are a few scenarios that could be likely:
| Split Ratio | Stock Price After Split |
|---|---|
| 2 for 1 | $250 |
| 3 for 1 | $167 |
| 4 for 1 | $125 |
| 5 for 1 | $100 |
| 6 for 1 | $83 |
| 7 for 1 | $71 |
| 8 for 1 | $63 |
| 9 for 1 | $56 |
| 10 for 1 | $50 |
Calculations by author.
If Meta were to deploy a stock split, I would assume it wants to keep its price above at least $100. That has generally been around the target area for other tech stocks after a split. Chipmaker Nvidia recently did a 10-for-1 split, and its stock is trading for around $120.
There's definitely room for Meta to do a stock split and remain above the $100 mark. I wouldn't be surprised if the company were to announce one this year, especially if the stock continues to rally.
Investors should have bigger concerns than whether Meta does a stock split
For investors, what should ultimately matter is the outlook for the business in the long run, not whether the company is likely to announce a split. While its fundamentals are strong, with Meta reporting an impressive $45.8 billion in profit over the trailing 12 months, the company could face some challenges.
Its growth rate has improved in the past year, but it wasn't all that long ago that the business looked to be in trouble and struggling to grow. I believe crackdowns on TikTok and Elon Musk's transformation of X, formerly Twitter, have played a role in the improvement. I don't believe Meta has suddenly found a button to turn on its growth and fix all of its problems.
It's still also largely dependent on demand in the ad market, and that could soften if the economy goes into a recession. Meanwhile, as it continues to spend heavily on AI along with the metaverse and its Reality Labs division, its profit margin could also come back down.
META growth rate and profit margin; data by YCharts. YOY: year over year.
Investors should tread carefully with Meta Platforms stock
A stock split could give Meta's shares a boost, but it's not something investors will likely be able to rely on for continued gains. There's still plenty of risk and uncertainty surrounding the business: namely, whether its growth rate is truly sustainable in the long run.
Investors have seen how quickly the markets can turn on Meta when it isn't performing, after it fell by more than 60% in 2022. Buying this stock, as it trades near its all-time high, could be dangerous right now.
