The Unprecedented, Invincible Stock Split by Wall Street's Elite in 2024 Has Commenced
The Unprecedented, Invincible Stock Split by Wall Street's Elite in 2024 Has Commenced
Without a doubt, Wall Street's rulers are the bulls. Lately, the influential Dow Jones Industrial Average, influential S&P 500, and growth-fueled Nasdaq Composite have attained significant milestones of 45,000, 6,000, and 20,000 respectively. These achievements are psychologically significant.
Several factors contribute to the market's ascent to new heights. These include the AI revolution, exceptional corporate earnings, and the impact of Donald Trump's November election victory. However, it's essential to acknowledge that the enthusiasm surrounding stock splits has significantly contributed to this market surge.
In the year 2024, stock-split-oriented companies garnered significant attention on Wall Street.
A stock split is a method companies employ to artificially adjust their share price and outstanding shares by the same measure. This alteration doesn't affect market capitalization or the company's fundamental operations.
Although stock splits exist in two varieties – forward and reverse – the investing community is more drawn to forward splits. These splits aim to make stocks more affordable for ordinary investors and employees participating in stock purchase plans by lowering the share price.
Less popular is the reverse split. These splits aim to enhance share prices, often by struggling businesses seeking to meet the minimum continued share price listing standards of major stock exchanges. Even though not all reverse splits are a bad omen, the companies instigating these splits warrant extra scrutiny and historically have poor performance records.
Forward stock splits, on the other hand, are popular with investors. Companies undertaking forward splits have a history of outperforming their competitors and innovating significantly. Bank of America Global Research analyses show that these companies have averaged a 25.4% return in the 12 months after announcing their split since 1980, compared to the S&P 500's 11.9% annual return.
In 2024, numerous prestigious businesses carried out stock splits, including AI heavyweights like Nvidia, Broadcom, and Super Micro Computer, which all executed 10-for-1 forward splits.
On Dec. 16, this AI titan is expected to complete its last stock split this year.
This AI titan has soared 2,150% since its IPO, with its latest stock split now in effect
On Nov. 20, artificial intelligence-driven cybersecurity leader Palo Alto Networks (PANW 1.39%) revealed its fiscal first-quarter operating results for 2025. The company's board also announced a surprising twist – a 2-for-1 forward split. This split, set to complete after the close of trading on Dec. 13, began trading at the adjusted price from Dec. 16. Palo Alto has undergone two stock splits since going public, with the previous one being a 3-for-1 forward split in September 2022.
Since debuting in July 2012, Palo Alto Networks shares have experienced an astounding 2,150% surge in value, as of Dec. 11's closing bell. This outstanding performance is due to the company outperforming, out-innovating, and outmaneuvering its competitors.
It's essential to acknowledge that Palo Alto Networks is in an advantageous position to capitalize on cybersecurity becoming a fundamental necessity service.
As more businesses are migrating their data and customer data online and into the cloud, the responsibility of safeguarding this information is increasingly falling onto third parties. Cybercriminals do not follow economic downturns, bad days on Wall Street, or global economic bumps. Protecting sensitive data is a constant necessity, which guarantees steady operating cash flow.
However, nothing has driven more consistent cash flow for Palo Alto Networks than the strategic shift made six years ago to focus on software-as-a-service (SaaS) subscriptions. Although the company has not abandoned physical firewall solutions, they have become an increasingly smaller proportion of revenue over time.
Palo Alto Networks' AI-inspired next-generation security platforms are more agile than on-premises security solutions. As a result, they are better at spotting and responding to potential threats.
More critically, a subscription-based model yields higher margins than physical firewalls and is more likely to maintain existing customers' loyalty to the brand. This contributes to the consistency and predictability of the company's operating cash flow.
Predictability is essential to Palo Alto because it frequently uses its cash flow to make strategic acquisitions. This strategy has helped the company expand its product portfolio and open up cross-selling opportunities since its IPO in 2012.
Lastly, Palo Alto's ability to attract larger customers is noteworthy. As of October, the company had 305 customers with at least $1 million in annual recurring revenue (ARR), an 13% increase from the previous year's quarter. Approximately 20% of these customers (60) were generating more than $5 million in ARR, an increase of 30% from the preceding quarter. Larger clients tend to generate better margins.
If Palo Alto Networks remains steadfast in their approach and implements their strategy effectively, there might be a strong possibility of requiring another stock split in the coming five years, potentially even sooner.
Investors closely watched the market in 2024 due to the numerous stock-split-oriented companies, such as AI heavyweights like Nvidia, Broadcom, and Super Micro Computer, which executed 10-for-1 forward splits. After announcing a 2-for-1 forward split, Palo Alto Networks, an artificial intelligence-driven cybersecurity leader, saw its share price become more affordable for ordinary investors, aiming to attract more participation in stock purchase plans.