Investors like stock splits because they typically follow sizable and sustained share-price appreciation, which is often a hallmark of competitively advantaged businesses. Indeed, stocks that split since 1980 have beat the S&P 500 (^GSPC 0.03%) by an average of 13 percentage points in the year following the stock-split announcement.
AppLovin (APP -2.73%) and HubSpot (HUBS -1.80%) are stock-split candidates at their current share prices, and certain Wall Street analysts are predicting substantial gains for shareholders, as detailed below:
- Brian Nowak at Morgan Stanley has set AppLovin with a bull-case target price of $765 per share. That implies 77% upside from its current share price of $431.
- Joshua Reilly at Needham has set HubSpot with a target price of $900 per share. That implies 111% upside from its current share price of $426.
Here's what investors should know about these potential stock-split stocks.
Image source: Getty Images.
AppLovin: 75% implied upside
AppLovin develops ad tech software that has traditionally aimed to help developers market and monetize applications through mobile and connected TV campaigns. But the company has more recently expanded into e-commerce advertising. Its platform features an artificial intelligence (AI) engine called Axon, which uses sophisticated machine learning models to match advertiser demand with publisher supply.
AppLovin reported very strong financial results in the second quarter. Revenue increased 77% to $1.2 billion, and generally accepted accounting principles (GAAP) net income increased 169% to $2.39 per diluted share. The company also completed the sale of its mobile applications businesses, meaning it can focus solely on its booming advertising business in the future. Management anticipates 59% advertising revenue growth in the third quarter.
Importantly, management also highlighted a few potential catalysts on the horizon. The company currently sources most ad inventory from mobile games but in the near future will add other supply sources like social media, music, news, sports, and websites. Additionally, it has traditionally provided managed advertising services but will open its self-service platform on referral basis in October, with a global launch to follow in the first half of 2026.
Wall Street expects AppLovin's earnings to increase at 48% annually through 2026. That makes the current valuation of 61 times earnings look reasonable, especially when the company beat the consensus earnings estimate by 23% in the last six quarters. Investors should feel comfortable buying a small position in this potential stock-split stock today.
HubSpot: 111% implied upside
HubSpot develops customer relationship management (CRM) software. Its platform comprises productivity applications for marketing, sales, service, and operations, as well as tools for content management and payments. The company focuses on mid-market businesses, defined as those with 2 to 2,000 employees.
HubSpot has embedded its platform with an AI engine called Breeze. It can summarize CRM records, draft emails, build webpages, generate marketing content, and provide customer support. Breeze can also analyze information and surface insights, and make recommendations that improve productivity of sales, marketing, and service teams.
HubSpot reported encouraging Q2 financial results that beat estimates on the top and bottom lines. Its customer count rose 18%, and the average subscription revenue per existing customer increased 1%. In turn, revenue increased 19% to $761 million, and non-GAAP net income rose 13% to $2.19 per diluted share. CEO Yamini Rangan mentioned strong adoption of AI features across the CRM platform as a key contributor.
Wall Street expects HubSpot's adjusted earnings to grow at 22% annually through 2026. That makes the current valuation of 50 times adjusted earnings look tolerable, especially when the company beat the consensus earnings estimate by an average of 6% over the last four quarters. Importantly, every analyst following HubSpot sees the stock as undervalued. The lowest target price is $593 per share, implying 39% upside from its current share price of $426. Investors should feel comfortable buying a small position today.
