While stock splits don't change the fundamental value of a business, investors are often drawn to corporations -- particularly major ones -- that decide to split their stock like a moth to a flame. That's what recently happened when Netflix announced a 10-for-1 stock split: The company's shares jumped on the news.
While it's always hard to predict which prominent company will make this move and when, my view is that Meta Platforms (META 3.98%) is a strong candidate to do so by 2030. Let's explore why this is the case and what it means for investors.
A unicorn among the "Magnificent Seven"
One reason companies split their stock is to make their shares more affordable to average investors. So, the more expensive it is, the more likely it is to split, all else equal.
Meta Platforms has never split its stock -- making it the only member of the Magnificent Seven that has never done so -- but perhaps that's because it hasn't had to. The company had its IPO at $38 per share in 2012. It has since crushed the market, but its share price peaked at nearly $800.
While some companies have done stock splits at these levels, Meta Platforms boasts a strong medium-term outlook and could see its shares rise significantly through 2030, making it an even better candidate for a stock split.
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Don't worry about Meta's post-earnings dip
Some might balk at the idea that Meta Platforms will perform well through 2030, considering the company's shares dropped significantly after it reported its third-quarter results. However, a closer look reveals that the tech giant's prospects are fine.
The market did not appreciate the significant tax charge Meta incurred during the period, nor is Wall Street excited about the company's increased capital expenditures (capex), which could negatively impact its earnings per share (EPS). Fair enough. However, Meta's third-quarter results were once again solid.
Sales grew 26% year over year to $51.2 billion. And without the one-time noncash tax expense the company incurred due to a new U.S. law -- something outside its control -- its EPS would have climbed 20.2% year over year to $7.25.
In other news, Meta Platforms continues to deepen its ecosystem. The company's daily active users across all its websites and apps grew 8% year over year to 3.54 billion.
What could drive Meta Platforms' results over the next few years? Artificial intelligence (AI). The company is expertly leveraging the technology, which is driving massive revenue growth.
Meta has deepened engagement on its platforms through AI algorithms that recommend content its users want to keep watching. The company has also launched AI-based ad tools to help businesses improve their targeted advertising. The tech leader sees plenty of room to grow as it seeks to completely automate the ad launch process by the end of next year.
NASDAQ: META
Key Data Points
Meta Platforms is already one of the leading digital ads companies in the world, but these initiatives are improving its business. The Facebook parent will have other opportunities through the end of the decade.
For instance, Meta Platforms is going all in on AI glasses. The company's CEO, Mark Zuckerberg, believes glasses will be the primary way with which people interact with AI. He called it the "ideal form factor" for the technology.
While Chatbots are powerful, they can't see or hear what we do, but glasses can when equipped with the proper tools. AI glasses can interact with the world in real time, while also possessing the analytical abilities AI chatbots typically have.
Zuckerberg believes that AI glasses will become the norm within 10 years. Perhaps that's too optimistic, but it seems likely that Meta will make significant strides in this area by the end of the decade, which will boost its "other revenue."
A solid buy-and-hold pick regardless
Meta Platforms' spending on AI-related infrastructure seems justified, given that we are still in the early stages of the AI revolution. Yet, the technology is already having a meaningful impact on its business. No matter which way the field goes next, Meta Platforms will be ready to pounce. That grants the company excellent prospects.
Given its current stock price of about $627, Meta Platforms would need a compound annual growth rate of 9.8% to reach $1,000 within five years. The company could pull it off (and then some) and announce a stock split thereafter. Whether or not it does, though, the stock is worth holding on to for the long term.
