Stock splits are popular with investors because they make shares more affordable and put the spotlight on high-performing stocks, and because stock splits are only necessary after a large and sustained increase in a stock price, which in itself is often a sign of a company with strong financial position and promising growth prospects.
NVIDIA (NASDAQ: NVDA) Case in point: The Wall Street Journal called the chipmaker “nearly unbeatable” due to its enduring competitive advantages across superior hardware and a strong supporting software suite. Nvidia shares have soared 780% since January 2023 amid unprecedented demand for its artificial intelligence processors.
The company reset its high-flying stock price in June with a 10-for-1 stock split, its second in three years, and Wall Street remains bullish. The company's median 12-month price target of $144 a share represents a 12% upside from the current price of $128. But some analysts see even more upside potential in the other two splitting stocks.
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Broadcom (NASDAQ: AVGO) Announced 10-for-1 stock split The stock split occurs in June 2024 and July 2024. Hans Mosesmann of Rosenblatt Securities recently raised his price target to $240 per share, implying a 50% upside from the current share price of $160.
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Celsius (Nasdaq: CELH) The company announced a 3-for-1 stock split in November 2023 and executed the split that same month. Gerald Pascarelli of Wedbush Securities recently lowered his price target to $83 per share from $85, but his new estimate still represents a 112% upside from the current share price of $39.
Here's what investors need to know about Broadcom and Celsius.
Broadcom: Expected to rise 50%
Broadcom specializes in semiconductors and infrastructure software. It is a market leader in data center networking chips and application-specific integrated circuits (ASICs), custom silicon built for specialized applications, such as: artificial intelligence (AI). For example, Broadcom alphabetGoogle and Meta Platform The company designs custom AI processors and recently landed a third major customer, which Reuters identified as TikTok's parent company, ByteDance.
With its acquisition of VMware last year, Broadcom has also become a market leader in virtualization software. Virtualization enables companies to more efficiently manage and utilize their IT infrastructure by dividing physical hardware into multiple virtual systems, allowing multiple operating systems and applications to run simultaneously on a single physical server.
Since the acquisition, Broadcom has simplified its VMware portfolio, reducing product SKUs from 8,000 to four core products. The company is also moving all virtualization products to a subscription model. Going forward, Broadcom will focus on upselling clients to VMware Cloud Foundation, a hyperconverged infrastructure (HCI) solution that unifies virtualized compute, storage, and networking. Forrester Research Last year, VMware was recognized as a leader in the HCI market.
Broadcom reported strong second quarter results, beating expectations on both revenue and profit. Revenues rose 43% to $12.5 billion, driven by strong demand for its AI infrastructure and VMware virtualization products. Excluding VMware's contribution, revenues increased 12%. Meanwhile, non-GAAP net income increased 20% to $1.10 per diluted share.
Going forward, Wall Street analysts expect adjusted earnings per share to grow 24% annually through fiscal 2025, which ends in October 2025. At this consensus estimate, the current valuation of 36.9 times adjusted earnings looks relatively reasonable. From this price, Broadcom could potentially earn a 50% return over the next 12 months, but investors buying shares today should look at at least a three-year timeline.
Celsius: Expected to increase by 112%
Celsius develops and distributes energy drinks in major retail channels in the United States. The company has achieved strong brand awareness in key regions and is leveraging that momentum to expand globally. Celsius plans to launch its products in the UK, Ireland and Canada in the first half of 2024, followed by Australia, New Zealand and France in the second half of 2024.
Celsius is the third most popular energy drink in the U.S. The company increased its market share by 139 basis points last year, while major brands Red Bull and Monster BeverageIts rival, Monster Energy, rose 37 basis points and fell 134 basis points, respectively, during the same period.Simply put, Celsius is catching up with its industry pioneers.
The company has found success by marketing its beverages as a “healthy, sugar-free alternative to traditional energy drinks.” Celsius has a thermogenic effect, which boosts the metabolism and raises body temperature. It is clinically proven to increase calorie burn during exercise, making the brand popular in gyms and fitness centers.
Celsius reported record second quarter results, with revenue up 23% to $402 million, gross profit expanding 320 basis points and GAAP net income up 65% to $0.28 per diluted share. CEO John Fieldly told analysts, “We believe we are well positioned for category share growth.”
However, Wall Street expects the company's profits to grow 15% annually through 2026. This projection makes the current valuation of 39 times earnings look quite expensive. As such, I'm not convinced Celsius will be able to generate triple-digit profits over the next 12 months, and I'm going to keep the stock on my watchlist for now.
Should I invest $1,000 in Broadcom right now?
Before you buy Broadcom stock, consider the following:
of Motley Fool Stock Advisor The analyst team Top 10 Stocks Here are the stocks investors should buy right now…Broadcom wasn't among them. The 10 stocks selected could generate huge profits over the next few years.
Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, That works out to $786,169.!*
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Randi Zuckerberg, a former director of market development and public relations at Facebook and sister of Meta Platforms CEO Mark Zuckerberg, serves on Motley Fool's board of directors. Suzanne Frey, an Alphabet executive, serves on Motley Fool's board of directors. Trevor Genevin The Motley Fool has invested in and recommends Alphabet, Celsius, Meta Platform, and NVIDIA. The Motley Fool recommends Broadcom. The Motley Fool recommends: Disclosure Policy.
2 stock-splitting stocks to buy before they soar 50% and 112%, according to Wall Street analysts (hint: it's not Nvidia) Originally published on The Motley Fool
