Stock splits don’t create any value whatsoever, but when they are announced, they tend to attract considerable attention from retail investors. Indeed, more accessibility for everyday investors is a good thing, and while lower share prices may entice some to pick up a few shares, giving them a bit of a temporary jolt, it’s vital that investors don’t lose sight of what really matters: intrinsic value.
Indeed, it doesn’t matter how many times you cut a share price; it’s the business itself that matters most. In any case, if you’re a retail investor who has always wished you could buy a stock like Meta Platforms (NASDAQ:META) without having to put up just north of $700 for a single share, stock splits can be a huge piece of news, especially if a split happens at a good time.
Meta Platforms is a hot AI contender that’s getting a bit too out of reach for small investors
With Meta tripling down on the AI race, with shares priced at a still very modest 25.5 times trailing price-to-earnings (P/E), perhaps the only thing pricey about the stock is the price of admission itself.
For now, Meta and its top boss, Mark Zuckerberg, have not announced their intention to split. However, I view the Magnificent Seven darling as having a high probability of one over the next two years, especially if shares continue to appreciate at such a blistering pace (something I expect as we begin to get a better gauge of the payoff following its aggressive efforts to grab much of the very best AI talent that’s out there).
In the meantime, it’s mostly rumors about a split, but if there’s anything that would be a win for young, new investors, it’s a more affordable price of admission into the AI fast-mover.
Meta stock could surpass $1,000 per share in the not-so-distant future—what then?
Having a look at the Wall Street-high price target, which is sitting just shy of the $1,100 per-share level, I think the odds of a split could rise significantly over the year ahead.
Of course, time will tell if such a bullish target (currently held by a very well-respected Rosenblatt Securities analyst Barton Crockett), which implies close to 55% in upside from Friday’s close, will be hit in a timely manner. Either way, I wouldn’t be so surprised if shares of Meta were to get right back into rally mode after recently dipping just shy of 11% from its all-time highs, just shy of $800 per share.
In the meantime, tech stocks could stay in a slump for a while as investors digest the latest Trump 100% tariff threats on China. Indeed, such a macro shock could weigh down the whole market for a while longer. And if Meta stock does get caught in a continued downdraft, a stock split could be pushed further into the future.
Meta stock is a buy, but not because it’s overdue for a split
At the end of the day, Meta is moving fast with AI, but it’s not just the pace of advancement that has me most excited. Rather, it’s how the firm can utilize the profound technology as it looks to enhance its social media family of apps while taking digital advertising to the next level. Whether we’re talking about AI-made ads or AI-driven targeting, Meta looks to have one of the soundest AI monetization narratives in all of big tech.
Perhaps the big opportunity for Meta is how AI can turn WhatsApp into a cash cow. With earnings growth poised to rise by the high-teens over the foreseeable future, it’s tough to bet against the name as it aims for the four-figure milestone, and, perhaps shortly after, a big 10-for-1 split.
Arguably, the high chance of a split is the last reason to consider picking up a share today, or more, for those investors with a more significant sum to put to work.
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