For much of the last three years, artificial intelligence (AI) has been the primary catalyst lifting the tide on Wall Street. But it's not the only trend responsible for lifting the benchmark S&P 500 to new heights.
In addition to AI, investors have gravitated to businesses announcing and completing stock splits.
A stock split is an event that allows publicly traded companies to superficially adjust their share price and outstanding share count by the same factor. These changes are cosmetic in the sense that they have no impact on a company's market cap or its underlying operating performance.
Though stock splits can move a company's share price up or down, there's a cavernous gap in perception between forward and reverse splits. The latter is designed to increase a company's share price, often with the goal of ensuring continued listing on a major stock exchange. Most investors shy away from reverse splits as they're typically being conducted by struggling companies.
Image source: Getty Images.
In comparison, Wall Street often gets excited when businesses announce and complete forward splits, which make a company's shares more nominally affordable for investors who can't purchase fractional shares through their online broker. A business that needs to reduce its share price so everyday investors can buy stock is typically doing something right from an operating standpoint and out-innovating its peers.
What's more, an analysis back-tested to 1980 from Bank of America Global Research found that public companies completing forward splits more than doubled the average annual return of the S&P 500 in the 12 months following their split announcement (25.4% vs. 11.9%).
As we move forward into the fourth quarter, one of Wall Street's brand-name stock-split stocks of 2025 stands out as a smart buy, while its highest-profile reverse split remains off-limits.
This magnificent stock-split stock can drive rock-solid long-term gains
Although the number of highly influential businesses announcing and completing forward splits has declined in 2025 from the previous year, there are still quite a few phenomenal stock-split stocks that can make patient investors richer. Perhaps none fits the bill quite like auto parts supplier O'Reilly Automotive (ORLY +0.37%).
While O'Reilly wasn't the first brand-name company to complete its split in 2025, it did kick off stock-split euphoria this year by announcing its intent to conduct a forward split in mid-March. After getting the approval of its shareholders, O'Reilly enacted a 15-for-1 forward split -- the largest in its history as a public company -- after the close of trading on June 9.
Since its initial public offering in April 1993, O'Reilly has delivered gains of more than 66,000% to its shareholders. This outperformance is a reflection of macro tailwinds working in its favor, as well as internal innovation improving its outlook.
NASDAQ: ORLY
Key Data Points
In May, S&P Global Mobility, which is a division of the more well-known S&P Global, released its annual study on the average age of cars and light trucks on U.S. roadways. Based on registrations, the average age of vehicles in this country has expanded from 11.1 years in 2012 to an all-time high of 12.8 years in 2025. This shows drivers are hanging onto their vehicles longer, which means consumers and mechanics will be counting on companies like O'Reilly to supply the parts and accessories needed to keep them in tip-top shape.
In terms of innovation, O'Reilly Automotive's biggest advancement has been refining its logistics and supply chain. At the end of last year, it had 31 regional distribution centers and almost 400 hub stores. Its hub-and-spoke distribution model is designed to have more than 153,000 stock keeping units (SKUs) available on a same-day or overnight basis from hub stores to the company's more than 6,000 retail locations. Setting up its network in this fashion ensures that consumers and mechanics can get the parts they need quickly.
From an investment standpoint, perhaps nothing stands out more than O'Reilly's share repurchase program. Since initiating a buyback program in 2011, just shy of $26.6 billion has been put to work to repurchase nearly 60% of its outstanding shares. Businesses with steady or growing net income and a declining share count should see a notable boost in earnings per share (EPS).
While O'Reilly Automotive stock isn't cheap at 32 times forecast EPS for 2026, all the puzzle pieces are firmly in place for this company to continue to outperform on an operating basis for years to come.
Image source: Lucid.
Wall Street's most-anticipated reverse split continues to stumble, despite its cash-rich balance sheet
However, not every stock-split stock is necessarily worth buying -- even if it's popular.
In August, electric-vehicle (EV) manufacturer Lucid Group (LCID +3.32%) announced it would undertake a 1-for-10 reverse split, which officially went into effect before trading began on Sept. 2. This split increased the company's share price from around $2 to closer to $20, which puts it back on the radars of institutional investors who won't buy stocks with a share price below $5.
On paper, Lucid should be a success story. With Tesla effectively vacating the premium EV space and deemphasizing the Model S in favor of the more-affordable and mass-produced Model 3 sedan, Lucid's Air sedan had every opportunity to step in and become the luxury EV sedan of choice. But instead of taking the bull by the horns, Lucid Group has dealt with misstep after misstep.
Some of these issues have been beyond Lucid's control. The COVID-19 pandemic led a laundry list of supply chain disruptions that thwarted Lucid's efforts to ramp production. Additionally, President Donald Trump's "Big, Beautiful Bill" ended the $7,500 clean vehicle credit, as of the end of September. While Lucid's EVs didn't initially meet the manufacturer's suggested retail price to quality for this credit, leasing programs on future models were expected to be buoyed by this credit.
NASDAQ: LCID
Key Data Points
But there's no question that Lucid's management team also dropped the ball. Between July 2021 and 2024, management's forecast plummeted from a projected 90,000 units of production to just 9,000 EVs. Management also reduced its prior production forecast of 20,000 EVs this year to a range of 18,000 to 20,000 EVs. In other words, Lucid's forecasts should be taken with a grain of salt, because the company hasn't been able to stand behind any of its growth projections.
Furthermore, the debut of the more-versatile Gravity SUV was pushed back from 2024 into 2025. What opportunity Lucid had to secure significant share in the luxury market appears to have been missed.
The other problem that absolutely can't be overlooked by investors is Lucid Group's ghastly operating performance. It's lost $13.8 billion since the company was incepted, and has burned through $1.26 billion in cash from its operations through the first six months of 2025. Even with $4.86 billion in total liquidity, as of the midpoint of this year, Lucid's cash-burn trajectory suggests it may not stick around long enough to see its production successfully ramp.
Though not all reverse stock splits are worth avoiding, Lucid Group offers a compelling case for why investors should keep their distance in October (and well beyond).
