The value of a stock split is exactly zero. A company divides its existing shares into multiple shares, reducing the price per share while maintaining the overall market capitalization, but nothing about a company’s fundamentals like earnings and revenue is changed.
Despite this, stock splits are popular with investors and management alike. Investors view them as a bullish signal, often associating splits with strong past performance and growth confidence, leading to short-term price gains. Management uses splits to make shares more affordable, attracting smaller investors and boosting liquidity. It is also seen as a chance to increase institutional investments and index inclusion, particularly for price-weighted indices like the Dow Jones Industrial Average.
Two recent stock-split stocks present compelling opportunities for investors who should consider buying hand-over-fist in May.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA | NVDA Price Prediction), the far-and-away frontrunner in artificial intelligence graphics processing units (GPUs), executed a 10-for-1 stock split on June 7, 2024, reducing its share price from $1,200 to $120 to enhance affordability. Today, NVDA stock trades around $113 per share, 6% below the post-split price but the all-time high of $153 reached in early January. Briefly the most valuable company on the market with a $3.6 trillion market cap, Nvidia is now the third biggest stock with a $2.7 trillion market value.
The split followed NVDA stock’s 239% surge in 2023, driven by AI chip demand and reflecting management’s confidence in continued growth. Fourth-quarter revenue hit $39.3 billion, up 78% year-over-year and 12% sequentially, with data center sales (where it houses its AI chips) at $35.6 billion, a 93% increase from last year.
While its forward P/E of 26 appears high, it aligns with projected full-year 2025 earnings of $4.50 per share, implying a 44% upside to a $165 per share one-year price target by analysts. Nvidia’s 0.03% dividend yield is modest, but its 92% annual EPS growth over the past five years underscores its growth potential.
The AI market is expected to become an $826 billion opportunity by 2030, according to Statista, and Nvidia is positioned to dominate as its H100 GPUs powers 90% of generative AI models. Its next-generation Blackwell superchip has already secured billions of dollars in sales for the chipmaker.
While risks abound for Nvidia, including competition from Advanced Micro Devices (NASDAQ:AMD) tariff hikes, and, more recently, export restrictions, for which it recently announced a massive $5.5 billion writedown, but NVIDIA’s 70% market share in AI GPUs makes it a must-buy, long-term holding post-split.
Walmart (WMT)
The world’s largest retailer, Walmart (NYSE:WMT) conducted a 3-for-1 stock split on February 26, 2024, lowering its share price from $180 to $60 to make shares more accessible, especially for its employee stock purchase program. WMT stock today, though, trades at $97 per share, a 61% gain, with a $778 billion market cap. The split came after a 20% stock gain in 2023, signaling confidence in Walmart’s everyday low-price policies and the growth of its e-commerce business amid inflationary pressure.
Fourth-quarter revenue reached $180.6 billion, up 5.3% year-over-year on a currency adjusted basi, with e-commerce sales growing 16% globally (20% higher in the U.S.). E-commerce now accounts for 18% of Walmart’ global sales and the fourth-quarter was the 11th consecutive quarter they exceeded 10% growth.
Its 1.0% dividend yield has increased for 51 consecutive years, making Walmart a Dividend King, and it increased the payout 13% in 2024, the largest increase in company history. The retail giant’s forward P/E of 37 seems high considering the $103 per share one-year price target Wall Street assigned, implying just 6% upside, but its grocery dominance, particularly in what could be a tariff-starved environment, warrants the premium.
Some 90% of U.S. consumers live within 10 miles of a store, driving hundreds of billions in sales every year. Free cash flow of $12.7 billion in 2024, although down $2.5 from the year before, supports $6.7 billion in dividend payments and $4.5 billion in share buybacks.
Challenges to the retailer’s continued success include tariffs on imported goods. Reuters said 60% of Walmart’s products are imported from China and the retailer reportedly warned President Trump his tariffs could lead to empty store shelves.
However, Walmart’s pricing power and e-commerce momentum make it a stock to buy-and-hold for decades post-split.
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