Savvy investors are drawn to stock splits not only because they make shares cheaper and more accessible, but also because stocks that split tend to outperform the market. There is a simple explanation for that trend: Stock splits are only necessary after substantial price appreciation, which itself is generally a hallmark of a high-quality business.
Meta Platforms (META -1.69%) and CrowdStrike (CRWD -4.18%) have achieved two-year returns of 160% and 190%, respectively, and most Wall Street analysts anticipate more upside in the next year.
- Meta Platforms has a median target price of $875 per share. That implies 16% upside from its current share price of $750 per share.
- CrowdStrike has a median target price of $490 per share. That implies 13% upside from its current share price of $434 per share.
Here's what investors should know about Meta Platforms and CrowdStrike.
Image source: Getty Images.
1. Meta Platforms
Meta Platforms owns three of the four most popular social media platforms as measured by monthly active users, a significant competitive advantage that provides access to troves of consumer data that helps brands target ad campaigns. As a result, Meta is the second-largest ad tech company worldwide, behind Alphabet's Google, and the company is poised to gain market share in the years ahead, according to Morningstar.
Why? Meta has already made strides in boosting engagement with artificial intelligence (AI), and it hopes to automate the entire ad creation process with AI by 2026. "Using the ad tools Meta is developing, a brand could present an image of the product it wants to promote along with a budgetary goal, and AI would create the entire ad, including imagery, video, and text," according to The Wall Street Journal.
Meta reported solid second-quarter financial results that surpassed estimates on the top line and crushed expectations on the bottom line. Revenue rose 22% to $47.5 billion, operating margin expanded 5 percentage points, and generally accepted accounting principles (GAAP) earnings surged 38% to $7.14 per diluted share. As a caveat, management warned that operating expenses would increase faster in 2026 as compared to 2025 due to continued investments in AI.
Wall Street expects Meta Platforms' earnings to increase at 5% annually through 2026. That makes the current valuation of 27 times earnings look expensive, but I think analysts are underestimating the company. Not only are ad tech sales forecast to grow at 14% annually through 2030, but Meta beat the consensus earnings estimate by an average of 16% in the last six quarters. Investors should feel comfortable buying a small position today.
2. CrowdStrike
CrowdStrike is a cybersecurity company best known for its leadership in endpoint protection, a framework focused on defending endpoints like servers, desktops, and mobile devices. However, its platform is a particularly compelling option because it comprises 30 software modules that address several large markets, including cloud security, identity protection, and security information and event management (SIEM).
Importantly, customers access all of those software modules by installing a single sensor designed to collect and integrate threat-intelligence data. Every data point is used to train AI models that detect and stop cyber attacks, which creates a network effect that makes its platform increasingly effective over time. CrowdStrike says its software is "uniquely effective" because its data advantage supports "industry-leading efficacy and low false positives."
CrowdStrike reported second-quarter financial results that beat estimates on the top and bottom lines. Revenue increased 21% to $1.1 billion, an acceleration from 20% growth in the previous quarter, driven by particularly strong momentum in cloud, identity, and SIEM products. And while non-GAAP net income increased just 5% to $0.93 per diluted share, that was due to heavy R&D spending that should support future growth.
Unfortunately, CrowdStrike has a valuation problem. Wall Street expects adjusted earnings to increase at 19% annually through the fiscal year ending in January 2027. That makes the current valuation of 120 times adjusted earnings look extremely expensive. Additionally, CrowdStrike is one of only four companies in the S&P 500 with a price-to-sales (PS) ratio above 26. I think investors should wait for a better entry point before purchasing shares.
