Key Insights
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Stock splits have gained significant interest among investors lately.
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Companies that announce stock splits often see better market performance over the subsequent year.
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While Meta Platforms has never implemented a stock split, its consistent growth suggests that it might happen soon.
Recently, stock splits have made a comeback. The rise of artificial intelligence (AI) has bolstered corporate profits, alongside expectations of impending interest rate drops by the Federal Reserve. These factors have contributed to rising stock prices, leading companies to consider stock splits, particularly when their share prices become a barrier for regular investors due to years of robust growth.
Another reason for investor enthusiasm around stock splits is that these events typically follow strong business and financial performance, which often persists. Surveys indicate that, on average, returns after a stock split announcement are about 25%, significantly higher than the S&P 500’s 12% return.
Many stocks could be potential candidates, but I have a hunch that Meta Platforms (NASDAQ:Meta) will be the standout stock split in 2026. Let’s delve into why.
Unmatched Reach
Meta Platforms boasts an extensive user base. As the parent of well-known social media platforms like Facebook, Instagram, WhatsApp, Messenger, and Threads, it attracts over 3.5 billion users daily and continues to add subscribers each quarter. This vast reach is highly sought after by advertisers aiming for broad exposure.
Additionally, Meta’s extensive collection of user data is likely one of its most significant assets. This wealth of information enables companies to tailor more relevant advertising content. Everything from posts, photos, messages, to videos provides insights that help connect advertisers with the right audience.
This combination of data resources and broad reach places Meta as the second-largest digital advertising company, trailing only behind Alphabet (Google). This competitive position underpins the company’s impressive financial outcomes. For instance, Meta reported a revenue of $51.2 billion for the third quarter, marking a 26% increase from the previous year, with earnings per share soaring 20% to reach $7.25.
Expansive and Growing Market
Beyond its large user base, several factors contribute to Meta’s growth potential. An advertising agency, Dentsu, projects that global advertising expenditure will rise by 5%, surpassing $1 trillion by 2026, with social media poised to be one of the fastest-growing segments, potentially expanding by 16% over the next year.
It’s also important to note Meta’s strides in AI technology. The company has harnessed its data prowess to develop Llama, a leading open-source AI that gives it a competitive advantage. Meta claims its AI is enhancing the quality and relevance of the content displayed to users. Engagement metrics indicate users are spending 5% more time on Facebook and 10% more on Threads in Q3, which correlates with increased ad revenue and a 10% rise in average ad pricing.
Why Meta is Likely to Split Its Stock
Meta has undoubtedly been a high-performing stock. Over the last decade, its revenue has skyrocketed by 852%, while adjusted net income has surged by 959%. These stellar results correlate with a 535% increase in Meta’s stock price since its IPO in 2012, where shares started at $38, now exceeding $600. Surprisingly, it remains the only member of the ‘Magnificent Seven’ stocks that hasn’t executed a stock split.
While no formal announcements have been made, given its current share price and the fact that many competitors have initiated splits, Meta seems to be an ideal candidate for one.
However, potential investors should be cautious. I think there could be a split—but that’s just one of the factors to consider. The stock’s valuation is compelling; with a price-to-earnings ratio of below 28, it’s lower than its peers in the Magnificent Seven and below the average S&P 500 ratio of 31.
All these factors combined—strong growth metrics, leadership in its field, and attractive pricing—make a persuasive argument for buying Meta shares before a potential stock split.
Is Now the Right Time to Buy Meta Platforms Stock?
Before jumping into a purchase of Meta Platforms stock, it’s essential to weigh some considerations:
The Motley Fool Stock Advisor team has pointed out what they believe to be the best stocks for investment at this moment—and noteworthy, Meta isn’t on that list. The team highlights 10 stocks poised for significant returns over the next several years.
Reflecting on past recommendations, one can’t ignore cases like Netflix, which generated $477,544 from a $1,000 investment since a December 2004 recommendation, or Nvidia, which would yield $1,122,686 from a similar investment since April 2005.
It’s worth remembering that the Stock Advisor boasts an average return of 952%, far surpassing the S&P 500’s 195%. It might be prudent not to miss out on their latest Top 10 list, which supports an investing community aimed at retail investors.
