Stock splits have become a recurring theme among investors, indicating a company’s robust performance and future growth potential. In recent times, several notable companies have announced stock splits, sparking interest among analysts and shareholders alike. This article delves into three significant stock-split companies — Netflix (NFLX), Booking Holdings (BKNG), and ServiceNow (NOW) — each demonstrating impressive growth and potential upside based on Wall Street’s projections.
Understanding Stock Splits
Historically, stock splits occur when a company divides its existing shares into multiple new shares to boost liquidity. This often happens after substantial gains in a company’s stock price, making shares less affordable for average investors. Research indicates that companies initiating stock splits experience an average return of 25% in the year following the announcement, significantly outperforming the S&P 500’s average gains of 12%. This trend highlights the positive correlation between stock splits and company performance.
1. Netflix: 73% Implied Upside
Netflix (NASDAQ: NFLX) has been a standout performer over the past decade, with the stock surging 782% despite recent challenges. The company executed a 10-for-1 stock split last year, making shares more accessible. Recently, Netflix reported a 17% increase in revenue, reaching a record $12 billion, and a 30% rise in diluted earnings per share (EPS) to $0.56.
The stock is currently trading about 41% below its peak, raising concerns regarding competition and content acquisition strategies. However, with 70% of analysts rating it a buy or strong buy and a price target of $111, this suggests significant potential for investors.
2. Booking Holdings: 90% Implied Upside
Booking Holdings (NASDAQ: BKNG) has delivered exceptional returns, skyrocketing over 31,000% in the past 25 years. Following a recent announcement of a 25-for-1 stock split, the stock experienced some volatility due to fears of a travel slowdown. Nevertheless, its fourth-quarter revenue increased by 16% year-over-year to $6.3 billion, with EPS climbing 38% to $44.22.
Wall Street maintains a bullish outlook on Booking Holdings, with 77% of analysts recommending it as a buy or strong buy. The average price target stands at $5,915, indicating a potential upside of 45%, while some extreme bullish predictions suggest gains up to 90% based on its strong financial performance.
3. ServiceNow: 149% Implied Upside
ServiceNow (NYSE: NOW) has shown resilience with an 852% increase in stock value over the past decade, despite a recent drop of 55% from its peak. The company’s 5-for-1 stock split came amid concerns about the impact of artificial intelligence on its SaaS offerings. In the latest quarter, ServiceNow’s revenue reached $3.53 billion, reflecting a remarkable 21% growth, while adjusted EPS rose by 24% to $0.92.
Analysts are optimistic about ServiceNow’s prospects, with 91% rating it a buy or strong buy. The average price target of $189 implies a potential increase of 81%, and some analysts predict further upside up to 149% based on its strong financial fundamentals.
In conclusion, stock splits serve as a barometer for a company’s growth and potential. Netflix, Booking Holdings, and ServiceNow are excellent examples of companies that have leveraged stock splits to enhance liquidity and attract investors. With favorable analyst ratings and compelling growth metrics, these stocks offer intriguing opportunities for both current and prospective investors.
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