Stock splits are typically bullish for investors.
Once a stock’s price gets too high, even a single share can become too expensive for smaller investors. Stock splits, in which each share is divided into more shares, don’t create any inherent value, but they reduce the sticker price of each new share and are typically considered bullish catalysts. Tesla Inc. (ticker: TSLA) and GameStop Corp. (GME) are the latest examples of stocks that jumped following stock split announcements. GameStop shares initially traded higher by 8% on July 6 after the company announced a 4-for-1 stock split, its first split since 2007. Here are eight stocks recommended by CFRA Research analysts that could be the next to announce stock splits.
Markel Corp. (MKL)
Specialty insurance underwriter Markel is an excellent candidate for a stock split. Markel has never issued a stock split, but its shares have nearly tripled in the past 10 years and closed at $1,276.01 on July 19. CFRA analyst Catherine Seifert says strong revenue growth, favorable insurance pricing and non-insurance sales are three bullish catalysts for Markel’s stock. In addition, she says Markel generates industry-leading underwriting profitability and premium growth. Seifert projects between 13% and 17% organic operating revenue growth and 14% to 16% earned premium growth in 2022. CFRA has a “buy” rating and a $1,575 price target for MKL stock.
O’Reilly Automotive Inc. (ORLY)
Auto parts giant O’Reilly Automotive is another candidate for a stock split, as its share price has gained more than 650% in the past 10 years to close at $689.32 on July 19. O’Reilly’s last stock split came in 2005. Analyst Garrett Nelson says that O’Reilly shares have an attractive valuation and that the company will likely outpace its auto parts peers in both earnings and revenue growth over the next several years. Nelson says O’Reilly has consistently gained market share and should continue to benefit from a decades-long rise in average vehicle age. CFRA has a “buy” rating and a $775 price target for ORLY stock.
Equinix Inc. (EQIX)
The largest global data center operator also has one of the market’s largest share prices and may be due for a split. Equinix shares are up more than 280% over the past 10 years and closed at $637.38 on July 19. The company has split its stock once in the past, a 1-for-32 reverse split in 2002. Analyst Michael Elliott says Equinix is a unique real estate investment trust that has an opportunity to scale globally. Elliott says the company’s highly recurring revenue base produces significant earnings visibility, and site expansion provides growth opportunities. CFRA has a “buy” rating and an $845 price target for EQIX stock.
BlackRock Inc. (BLK)
BlackRock is the largest U.S. asset manager and a leading global investment management company. In the past 10 years, BlackRock shares are up more than 250%. That gain has brought BlackRock’s share price up to close at $628.34 on July 19. Seifert says BlackRock should continue to grow assets at above industry-average rates and generate growth from its equity and fixed-income exchange-traded-funds business. CFRA has a “strong buy” rating and a $900 price target for BLK stock.
Thermo Fisher Scientific Inc. (TMO)
Thermo Fisher Scientific develops analytical instruments and services for the life sciences, pharmaceuticals and industrial markets. Thermo Fisher has never issued a stock split, but its shares are up more than 900% in the past 10 years to close at $536.87 on July 19. Analyst Stewart Glickman says Thermo Fisher generated impressive tail winds during the pandemic from testing, vaccines and therapies. While that momentum is starting to fade in 2022, Glickman says core revenue will grow roughly 8% in 2022. In addition, Thermo Fisher’s acquisition of clinical research provider PPD will boost revenue growth. CFRA has a “buy” rating and a $614 price target for TMO stock.
UnitedHealth Group Inc. (UNH)
UnitedHealth is the largest U.S. managed health care company. The business is another top candidate for a stock split given its share price rise of more than 850% in the past 10 years, climbing to close at $533.45 on July 19. The company’s last stock split came in 2005. Analyst Paige Meyer says UnitedHealth’s pending $8 billion acquisition of Change Healthcare is a near-term catalyst and provides opportunities to upgrade and grow its Optum health care services offerings. United is also expanding into seven new Affordable Care Act state exchanges. CFRA has a “strong buy” rating and $665 price target for UNH stock.
Bio-Rad Laboratories Inc. (BIO)
Bio-Rad Laboratories provides life science tools and services used in clinical research and diagnostics. Bio-Rad shares are up more than 380% over the past 10 years to close at $490.09 on July 19. The company has split its stock four times, most recently issuing a 2-for-1 split in 2002. Glickman says there is “robust” demand for Bio-Rad’s products in the life sciences industry, but supply chain issues may weigh on margins in the near term. He says Bio-Rad’s target of $2.8 billion in 2023 sales is within reach. CFRA has a “strong buy” rating and a $662 price target for BIO stock.
Palo Alto Networks Inc. (PANW)
Palo Alto Networks is a leading global cybersecurity provider. In the past 10 years since its 2012 initial public offering, Palo Alto shares are up more than 860%. That gain has brought Palo Alto’s share price up to close at $513.60 on July 19, but it has yet to issue a stock split. Analyst Janice Quek says Palo Alto’s product refreshes are generating plenty of interest from customers. The company has also announced a new partnership with Amazon Web Services to embed Palo Alto’s next-generation firewall into its public cloud. CFRA has a “strong buy” rating and a $573 price target for PANW stock.
8 companies that could issue the next stock split:
— Markel Corp. (MKL)
— O’Reilly Automotive Inc. (ORLY)
— Equinix Inc. (EQIX)
— BlackRock Inc. (BLK)
— Thermo Fisher Scientific Inc. (TMO)
— UnitedHealth Group Inc. (UNH)
— Bio-Rad Laboratories Inc. (BIO)
— Palo Alto Networks Inc. (PANW)
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8 Companies That Could Issue the Next Stock Split originally appeared on usnews.com
Update 07/20/22: This story was published at an earlier date and has been updated with new information.
