10 Substantial Stock Splits to Put on Your Radar

ACM Research

• Market value: $716.4 million
• Stock split: 3-for-1

Kicking off our list of stock split stocks is ACM Research (ACMR, $11.63), which develops and manufactures semiconductor processing equipment for wafer-level production applications. The company primarily supplies single-wafer cleaning equipment and considers its cleaning tools best-in-class, offering higher yields and greater efficiency than competitor equipment. ACMR's technology is protected by more than 350 issued patents.

The company ramped production of new products in 2021 and is on track to double its addressable market opportunity by adding two new product categories. ACM Research's revenues rose 66% year-over-year in 2021 and earnings per share (EPS) grew 73%.

However, in April, the company warned that March quarter results were likely to fall short of guidance due to COVID-related restrictions in Shanghai that have impacted employee access, production and logistics and ACMR's ability to ship finished products to customers. March quarter revenues fell 4% year-over-year and the firm posted an adjusted per-share loss of 1 cent versus earnings of 12 cents per share one year ago.

Another risk is ACM Research's heavy reliance on customers in China, who purchase most of its semiconductor manufacturing equipment. Worsening trade relationships with China could adversely impact the company's financial results, but ACMR hopes to mitigate trade risk by finding new customers for its equipment outside of the mainland.

ACMR declared a 3-for-1 stock dividend in March that was paid to investors on March 23. "We are implementing this stock split to make stock ownership more accessible to employees and investors," said Dr. David Want, CEO of ACM Research, at the time the stock split was announced.

Shares are down roughly 59% so far in 2022 as investors have digested increased risk and reduced guidance. Despite these risks, the semiconductor stock is well-liked by most of the 10 Wall Street analysts covering it, with five calling ACMR a Buy and four saying it's a Strong Buy.

Alphabet

• Market value: $1.50 trillion
• Stock split: 20-for-1

Alphabet (GOOGL, $2,272.05) which is the parent company to Google, is a worldwide leader in digital platforms. Its offerings include Chrome, Android, Google Search, Google Maps, Gmail, YouTube and a slew of other aps and services. The company's three business segments are Google Services, Google Cloud and Other Bets, a combination of earlier-stage businesses that are not yet individually material to results.

One of Wall Street's few mega-cap stocks, Alphabet has generated steady double-digit revenue and EPS growth over the past decade. GOOGL shares have returned approximately 150% over the last five years, far exceeding the roughly 80% S&P 500 total return for the same period.

Alphabet said sales were up 23% year-over-year in the March quarter, its slowest growth rate since 2020. GOOGL attributed the slowdown to rising inflation, supply-chain disruptions and the Ukraine war, which are reducing spending by brand advertisers, especially in Europe. Net income declined 8% and fell short of analyst estimates due in part to tough year-over-year comparisons and the company's decision to suspend operations in Russia.

Google Cloud Services, while still unprofitable, remains a growth area for Alphabet, with sales up 44% during the March quarter. And GOOGL also plans to build its capacities in cybersecurity by spending $5.4 billion to acquire Mandiant (MNDT).

Deutsche Bank analyst Benjamin Black recently reiterated his Buy rating on GOOGL stock. Black noted positives for the March quarter that include strong margins, a good performance from Google Search and growing interest in YouTube Shorts, a new service competing with TikTok.

Alphabet announced a 20-for-1 stock split in February that will be issued on July 15. The Google stock split requires shareholder approval and will be put to a vote on June 1. The company also recently announced a new stock buyback program, with plans to repurchase up to an additional $70 billion of its own shares.

Stock splits often make high-priced shares more attractive to retail investors and this could certainly be the case for GOOGL. Based on its most recent close, Alphabet stock would trade at about $113 per share post-split – much more accessible than the $2,272 per share it's priced at now.

Amazon.com

• Market value: $1.07 trillion
• Stock split: 20-for-1

Amazon.com (AMZN, $2,107.44) has been a growth stock for over two decades; big reinvestments in its core e-commerce business have paid off handsomely for investors with consistent double-digit sales and EPS gains. The company is best-known for its e-commerce site, but derives an increasing percentage of its profits from web services and digital ad segments.

The company's growth has slowed to single-digit rates in 2022 due to the impact of labor shortages, supply chain issues and rising costs. In addition, Amazon's ongoing investments in logistics, the cloud and related areas are pressuring near-term profits. During the first quarter of 2022, Amazon posted 7% year-over-year sales growth and operating income down nearly 60% from one year ago. Second-quarter guidance looks for 3%-7% sales gains and could include an operating loss.

Despite the company's strong historic growth, Amazon's stock returns have underperformed the S&P 500 over the last three years. In an effort to attract new retail investors, Amazon announced a 20-for-1 stock split effective June 3 that will drop the share price from roughly $2,100 to $101 (based on current levels). Stock splits are not common for AMZN, and this is the first one for the company since 1999. The split was announced at the same time as a new $10 billion share repurchase.

Citi analyst Ronald Josey recently called Amazon one of the best-positioned companies he covers. He has a Buy rating on AMZN stock, and expects the company to benefit from improved efficiencies due to new fulfillment centers and rising profit contributions from its web service and digital ad segments.

Dexcom

• Market value: $30.9 billion
• Stock split: 4-for-1

Diabetes care company Dexcom (DXCM, $314.94) makes glucose monitoring systems that are sold worldwide. Its novel implantable devices enable continuous glucose monitoring that are optimal for successful management of diabetes and also eliminate the need for painful finger sticks.

Global expenditures for diabetes care were estimated at $966 billion in 2021, according to research firm Statista. And the International Diabetes Federation projects the number of diabetic adults will rise from 537 million last year to 783 million by 2045, creating a huge growing market for the DXCM's products.

Dexcom became a leader in this market with its G6 continuous glucose monitor (CGM) and recently launched Dexcom One, a simpler and less expensive model that is helping the company build share in emerging markets such as Eastern Europe.

DXCM also plans to introduce the G7, a next-generation version of its leading device that is more convenient, 60% smaller and offers better performance than its predecessor. The G7 device has already secured approval in Europe and was submitted to the U.S. Food and Drug Administration (FDA) for approval during the December quarter.

Dexcom grew revenues 25% year-over-year in the March quarter, but adjusted EPS declined slightly due to higher expenses for research and development, collaborative fees and sales and marketing. The company is guiding for 15%-20% revenue growth in 2022 and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) margins of approximately 25%.

UBS recently added Dexcom to its list of stocks expected to rebound when market volatility subsides. In addition, earlier this year Wells Fargo raised DXCM stock to Overweight from Equal Weight (the equivalents of Buy and Hold, respectively), citing the upcoming G7 launch as a major growth driver. The Wells Fargo team thinks the company can potentially double the addressable market for CGM devices.

Dexcom found its way on this list of stock split stocks after announcing a 4-for-1 adjustment in late March. The split will increase its share count from 200 million to 800 million, effective June 10. Using the current $315 price, this will reduce DXCM's share price to roughly $74.

Napco Security Technologies

• Market value: $580.4 million
• Stock split: 2-for-1

Napco Security Technologies (NSSC, $15.80) makes electronic security devices for commercial and residential properties. Its products are sold in the U.S. via a network of 200+ distributors, 10,000+ independent dealers and 2,000+ independent integrators who install alarm systems in airports, office buildings, schools and hospitals.

In May, the company announced fiscal third-quarter results that included a 27% year-over-year rise in sales, while recurring revenues rose 35% during the three-month period to account for 33% of total revenues.

While supply-chain constraints on electronic products have increased backlogs and weighed on its bottom line, Napco is benefiting from rising demand for school security as COVID-related lockdowns have ended. Based on its survey of 136,300 schools and average spending of $75,000 per school, Napco envisions a $10 billion school market opportunity.

Napco also sees a $4.9 billion market opportunity tied to obsolete phone land lines and alarm systems across 5 million commercial buildings and 120 million residences in the U.S. Its cellular-based systems not only replace but upgrade, and create a recurring revenue run rate of $49.9 million annually as of April 2022.

NSSC became one of the first stock splits of 2022 after announcing a 2-for-1 adjustment late last year. The stock split went into effect on Jan. 4.

Four of the five analysts that cover NSSC rate the stock Buy or Strong Buy. Bullish investors point to the company's rising recurring revenues and the upcoming upgrade cycle in the school market as reasons to invest.

RH

• Market value: $6.9 billion
• Stock split: 3-for-1

Home furnishings retailer RH (RH, $279.45) – a member of the Berkshire Hathaway equity portfolio – sells high-end furniture, lighting, textiles and home decor through a network of 67 retail galleries and 38 outlet stores across 30 U.S. states and Canada.

Growth initiatives that include new gallery openings, global expansion, and new products and collections paid off handsomely for the company in 2021, fueling 32% sales gains and 46% adjusted EPS growth.

However, the company warns that red-hot inflation and rising interest rates during 2022 could soften demand and is guiding for just 5%-7% sales growth this year.

RH announced plans for a 3-for-1 stock split in March, and it's expected to be executed in the spring. Considering stock splits reduce the share price, the company said it seemed like an appropriate time given the runup RH has seen on the charts since its 2012 initial public offering (IPO), where it was priced at $24.

Gordon Haskett analyst Chuck Grom expects the company to use the $2.0 billion of cash on its balance sheet to aggressively repurchase shares or debt, noting that the price of RH shares has fallen precipitously in 2022 (down about 48% for the year-to-date).

Despite the cautious outlook provided by RH management, Wells Fargo analyst Zachary Fadem remains positive on the retail stock. He thinks the company's sales guidance will ultimately prove conservative, is maintaining his 2022 EPS estimate, and thinks the valuation is attractive for those with a long-term view.

Shopify

• Market value: $40.2 billion
• Stock split: 10-for-1

Shopify (SHOP, $318.59) sailed high during the pandemic, but shares have plummeted in 2022 along with other e-commerce names amid worries of slowing growth.

The company provides essential internet infrastructure for retailers seeking to build online sales. Its platform enables merchants to display, manage and market products across various sales channels, including web and mobile storefronts, and support order processing and fulfillment, inventory management, payment processing and customer relationship building.

A potential threat to Shopify comes from Amazon.com's recent launch of Buy with Prime, which is seen as a direct competitor as it allows third-party websites to tap into its fulfillment and delivery network. Shopify presently holds a 10.3% share of the U.S. retail ecommerce market, second only to Amazon's 41% share.

In a bid to expand its fulfillment services and compete more effectively against Amazon, Shopify in early May said it is buying Deliverr – a San Francisco-based startup that specializes in technologies for building fulfillment networks. The cash-and-stock deal is valued at $2.1 billion. Shopify is also partnering with digital payment platform Strike to accept Bitcoin payments on its network.

Shopify generated 22% year-over-year revenue gains in its March quarter, but significantly lower adjusted EPS compared to the year-ago period. The company also warned of slower revenue growth in fiscal 2022 due in part to tough year-over-year comparisons.

As part of its March quarter update, SHOP unveiled a 10-for-1 stock split that shareholders will vote at the company's annual meeting in June.

Stifel analyst Scott Devitt has a Buy rating on Shopify, but is cautious that inflationary headwinds are more likely to affect Shopify merchants versus those using Amazon.com due to differences in product mix. Citi, meanwhile, issued a negative catalyst watch on SHOP stock after its Q1 report, citing concerns that consensus analyst forecasts underestimate the market headwinds in place.

SMART Global Holdings

• Market value: $1.1 billion
• Stock split: 2-for-1

SMART Global Holdings (SGH, $21.59) makes specialty solutions for the computing, memory and LED markets worldwide. The company manufactures RAM modules for computers and smartphones, embedded and removable flash memory and flash component products, and LED products for lighting, video screens and specialty lighting applications.

Mobile/PCs and advanced lighting products comprise nearly half of the company's total sales and SMART Global is experiencing growth across all of its businesses. Last year's acquisition of Cree LED brought new offerings to the product mix that are fueling revenue and margin gains in this business.

Overall, SMART Global generated 48% revenue growth during the March quarter while delivering its eightH consecutive quarter of year-over-year sales gains. And adjusted EPS nearly doubled from the year-ago period to come in above analysts' consensus estimate. There's more where that came from, with Wall Street analysts forecasting 23.4% revenue and 35% EPS growth this year.

The company also announced a multi-year engagement with Meta Platforms (FB) that bodes well for future growth. SMART Global will provide AI-optimized architecture and managed services for Meta's ultra-scale AI computer and important new memory solution products for its data center and cloud applications.

SMART Global was another one of the early stock split stocks in 2022. The company announced a 2-for-1 stock split in early January that became effective Feb. 1. SGH also unveiled a $75 million share repurchase authorization.

SGH is well-liked by the analyst community too. All six of the Wall Street pros currently following the stock rate it either Buy or Strong Buy.

Tesla

• Market value: $760.4 billion
• Stock split: Amount not yet determined

Elon Musk is making headlines for his takeover of Twitter (TWTR). But the wealth engine that supports Musk's Twitter deal is Tesla (TSLA, $734.00), the electric vehicle (EV) company he helped start in the early 2000s. Tesla has quickly grown to become the world's largest electric vehicle maker with a worldwide EV market share estimated at 21%, according to research firm InsideEVs.

Tesla is a standout in the EV market because of the large number of models it offers (16), and its technological innovations that include Autopilot driverless assist and over-the-air software updates to improve the vehicle's range, power, braking and other features.

The company is ramping up capacity to meet anticipated demand. Tesla opened its Gigafactory in Texas earlier this year that is expected to produce 500,000 of its Model Y SUVs per year, as well as its Gigafactory in Berlin, Germany. To improve control over its supply chain, Tesla is also bringing some battery production in-house, a move expected to increase flexibility and improve margins.

Tesla delivered more than 310,000 EVs during the March quarter, up 68% year-over-year – and it believes it can grow this figure by an average of 50% annually over the next few years. Increased vehicle deliveries and higher sales prices during the March quarter generated 81% revenue growth for TSLA and more than tripled adjusted EPS. The company retains plenty of powder to fund future growth with $17.5 billion of cash on its balance sheet.

In late March, Tesla announced plans for a stock split. The stock split ratio has not yet been disclosed and the action will require a shareholder vote, which is likely to occur in October. As far as stock splits go, this would mark the second one for Tesla in as many years, with the last occurring in 2020 when the company split its shares 5-for-1. The shares went on to rally 80% from the time of the announcement through the actual split.

Wedbush Securities analyst Dan Ives recently reiterated his Outperform (Buy) rating on TSLA stock, citing the company's excellent March quarter results and his confidence that Tesla can deliver 1.5 million EVs in 2022. Most Wall Street analysts were impressed by the company's better-than-expected March quarter results, although some are cautious on valuation and supply-chain headwinds.

W.R. Berkley

• Market value: $17.7 billion
• Stock split: 3-for-2

W.R. Berkley (WRB, $66.66) specializes in commercial insurance products that includes excess and surplus lines, worker's compensation, professional liability and reinsurance. The company operates through 56 independently managed units, each serving territories, market segments or product types that require specialized knowledge.

Over the past decade, this consistent performer has delivered steady 7% annual growth in revenues and nearly 15% yearly EPS growth on a trailing 12-month basis.

WRB achieved record underwriting income and net income last year, while net premiums rose 22% and earnings per share nearly doubled. These impressive results occurred as the company benefited from rate increases in nearly all of its lines of business, margin gains and a further reduction in its expense ratio.

W.R. Berkley also returned more than $478 million to its investors via $265 million of special dividends, $90 million of regular dividends and $122 million of share repurchases.

The company has paid cash dividends without interruption since 1976 and grown its dividend 11% annually over the past 16 years.

Without providing specific financial guidance, W.R. Berkley recently shared that it is well-positioned to prosper during an inflationary environment and anticipates another great year in 2022. March quarter results support this thesis, showing 18% year-over-year premium gains, 158% EPS growth and a 35.5% return on equity.

Wells Fargo analyst Elyse Greenspan sees 2022 shaping up as a solid year for commercial line insurers in general and has made WRB stock one of her top picks in this sector.

W.R. Berkley announced a 3-for-2 stock split in February that went into effect in March.