Stock splits have enjoyed a renaissance in recent years, thanks in part to higher corporate profits and soaring stock prices. It's worth noting that while the practice was widespread in the late 1990s, it had fallen by the wayside before finding its way back into the limelight. Companies generally choose this path after years or even decades of robust financial and operating results have driven the stock price out of reach of average investors.
While a stock split doesn't change the underlying fundamentals of the business, it does make the stock more affordable for everyday investors and employees. This is a factor frequently cited by company managements as the catalyst for the split.
History tells us that the most successful companies tend to continue their winning ways. Businesses that enact splits generate stock price increases of 25%, on average, in the year following the announcement, compared with average gains of 12% for the S&P 500 (^GSPC +0.65%), according to data compiled by Bank of America analyst Jared Woodard.
Two recent stock-split stocks might be worth another look, according to certain Wall Street analysts.
Image source: Netflix.
Stock-split buy No. 1: Netflix -- 48% implied upside
Netflix (NFLX 1.18%) has been an undeniable winner for long-term investors. That success required patience, however, as the gains have never come in a straight line. The stock has gained 690% over the past decade, facilitating last year's 10-for-1 stock split.
However, Netflix stock currently sits 32% below its 2025 peak (as of this writing), driven lower by uncertainty regarding its proposed bid for the studio and content assets of Warner Bros. Discovery. There are also fears a bidding war could erupt between Netflix and Paramount Skydance.
While those concerns are justified, the foundation is already in place for the streaming giant's future success -- with or without Warner Bros. Netflix's strategy of continually expanding its streaming library has proven effective in attracting new viewers. The company uses its profits to add new content, continuing its virtuous cycle. The addition of a lower-priced, ad-supported tier and a password-sharing crackdown have cemented Netflix's streaming lead.
Its results have been consistently robust. In the third quarter, Netflix delivered record revenue, which grew 17% year over year to $11.5 billion, marking its biggest growth spurt since 2021. This resulted in diluted earnings per share (EPS) that jumped 27%, excluding a one-time, noncash tax charge. Management's outlook suggests its growth will continue, as its fourth-quarter forecast calls for revenue growth of 17% to $11.96 billion and EPS of $5.45, an increase of 28%.
NASDAQ: NFLX
Key Data Points
Wall Street is equally optimistic regarding Netflix's future prospects. Of the 43 analysts who offered an opinion in January, 65% rate it a buy or strong buy. Furthermore, Wall Street's average price target on the stock is about $126, implying additional upside of 39%.
However, one analyst believes his colleagues are aiming too low. Jefferies analyst James Heaney maintains a price target of $134 on Netflix stock -- the highest among his Wall Street peers -- suggesting potential upside of 48%.
Despite the uncertainty raised by the acquisition, Heaney is unconcerned, citing two factors. First, Warner Bros. Discovery's board of directors is committed to closing the deal, having rejected Paramount's advances twice. Second, news reports that Paramount had lost some of its financial backing, which increases the likelihood that the Netflix deal will ultimately prevail.
The resulting uncertainty has created an opportunity for investors, as Netflix stock is now trading for 28 times forward earnings, a significant discount to its recent multiple. Furthermore, the company's consistent track record of growth, solid execution, and global reach illustrate why Netflix stock is a buy.
Stock-split buy No. 2: ServiceNow -- 80% implied upside
Given its recent performance, ServiceNow (NOW 3.00%) might seem like a dubious choice. The stock shed roughly 28% of its value in 2025, and a rebound seems elusive.
However, the decline was primarily the result of a valuation that outpaced its performance. Despite its recent slump, the stock is still up more than 800% over the past decade, prompting a 5-for-1 stock split that was finalized in mid-December.
ServiceNow sits at the intersection of artificial intelligence (AI) and digital transformation, helping businesses automate repetitive tasks, streamline workflows, and implement AI. The company's ready-to-use applications cover a variety of business processes, including those in human resources, customer service, finance and accounting, and IT. One of the core features is a centralized system for managing requests, which increases efficiency, saving companies time and money.
NYSE: NOW
Key Data Points
The results tell the tale. In Q3, ServiceNow's revenue increased 22% year over year to $3.4 billion, while its adjusted EPS climbed 29% to $4.86.
One of the highlights of the report was the company's remaining performance obligation (RPO), which consists of contractually obligated revenue that hasn't yet been recognized. ServiceNow's backlog climbed 24% to $24.3 billion. History suggests that when RPO outpaces revenue growth, future growth will likely accelerate. Furthermore, its current RPO clocked in at $11.35 billion, setting an impressive floor for revenue over the coming four quarters.
Wall Street is clearly bullish regarding ServiceNow's future prospects. Of the 47 analysts who offered an opinion in January, a striking 91% rate the stock a buy or strong buy. Furthermore, Wall Street's average price target of $223 implies potential upside for investors of 53%.
However, one analyst is much more bullish than his peers. Morgan Stanley analyst Keith Weiss maintains an overweight (buy) rating and a split-adjusted price target of $263 -- the highest among his Wall Street peers -- suggesting potential gains of 80%. He argued the company's "strong execution" lays the groundwork for ServiceNow stock to soar over the coming year.
The stock's valuation is a bit more reasonable than it has been, but it's still selling for a premium of 30 times next year's expected earnings. That said, if ServiceNow can achieve the benchmarks set by Wall Street over the coming year, today's price might well be a bargain.
