Apple (NASDAQ: AAPL) is Tesla (NASDAQ: TSLA) made a splash this summer when they announced their respective 4-for-1 and 5-for-1 stock splits. Both shares rose in price in August (and reversed so far in September) following the news, albeit a share price. subsequently lower shares from a share split does not change the fundamental value of the stock.
Sure, there are some good reasons why a company might decide to split its stock, but at the end of the day a split occurs because a company (and therefore its share price) is growing. Three other tech companies that have grown rapidly and may follow Apple and Tesla̵
Leader in robotic assisted surgery
Nicholas Rossolillo (Intuitive Surgical): Intuitive has a great advantage in the field of robotic assisted surgery. The company’s da Vinci surgical system received approval for use in the United States 20 years ago, and the ensuing two-decade run has transformed the company into a leader in healthcare technology, valued with a market capitalization of over $. 84 billion.
2020 was a tough year for Intuitive. With the entry into force of on-site shelter orders around the world, the number of procedures performed with da Vinci decreased by 19% during the second quarter. Intuitive also announced that it was releasing new extended use tools that can be used 12 to 18 times (compared to current use of 10 times) that will reduce tool sales in the future but also cost customers (and hopefully). for patients).
However, even in the midst of the crisis, the new da Vinci machines in use continue to grow around the world. Intuitive reported that its total installed base of the Da Vinci system grew 9% from a year ago and reached 5,764 systems by the end of June. As a result, while fewer surgical procedures drove revenues down 22% to $ 852 million in the second quarter, the company is expected to quickly revert to growth mode. And in the meantime, this is still a very profitable company, with adjusted net income totaling $ 132 million during the period.
Thanks to its leadership and strong growth, Intuitive Surgical shares exceed $ 700 at the time of writing, more than double the value of three years ago, when the company split into 3 for 1 shares (when Intuitive was close to $ 1,000 per share). With the company continuing to benefit from the slow and steady migration from traditional to robotic surgery, another split would not be out of the question.
The breakup of Alphabet is coming, but probably not soon
Anders Bylund (Alphabet): The Google Alphabet parent has an unusual history when it comes to stock splits. The company split its shares exactly once, issuing a 2 for 1 split in 2014 which created a new non-voting share class. Google founders Sergey Brin and Larry Page retained their special Class B shares, which hold approximately 56% of the company’s effective voting power. The issue of new shares in a non-voting class ensured that the founders did not lose their absolute power in shareholder votes.
The moves sparked a storm of controversy, including several lawsuits. In order to comply with a court order to resolve these lawsuits, Google issued $ 522 million worth of additional Class C shares (the non-voting type) one year later, in the form of a dividend. which has issued 1.0027455 shares for each Class C unit you own. The fractions of shares were handled through cash payments.
Alphabet’s share prices have nearly tripled since the 2014 split, so maybe it’s time to issue another batch of non-voting shares for every Class A or Class C stub in your portfolio. I don’t think the company’s executives and board members are looking for a place in the Dow Jones Industrial Average, as Apple did over the summer, so this would simply be a shareholder-friendly change.
Brin and Page announced their plans to create the third share class through a stock split way back in 2012, citing demerger requests from “many of our investors”. You see, they pay attention to the needs of independent shareholders. It took two years to implement that plan. Alphabet has already created the trio of share classes, so the process may be faster this time around, but this company doesn’t like to rush things. So I wouldn’t be surprised to see a preliminary announcement soon, followed by the actual split many moons later.
Celebrate like it’s 1999?
Billy Duberstein (Amazon): Given the recent surge in interest in both Apple and Tesla following the announcement of the stock split, it’s not unthinkable that other big tech giants are considering a similar move. Amazon is the highest-priced stock among FAANG stocks and has been for a while, so it’s possible that the e-commerce and cloud leader are considering a share split today. At the current high price of around $ 3,300, its price is certainly going up for purchase by individual retail investors, unless they have an account that allows for fractional purchase of shares.
Many may not remember, but Amazon has actually split its stock before, even though it was over 20 years ago. At the height of the dot-com boom in the late 1990s, Amazon split its stock multiple times, including two separate 2-for-1s in 1998 and 1999, and then another 3-for-1 in 1999.
At the time, Amazon’s stock price was rising more and more as investors raced to jump on the Internet boom bandwagon. However, that party ended badly, and the subsequent dot-com failure caused Amazon’s stock to drop by 90% and its stock price to single digits. This can be a problem, as many investors view single-digit stocks as a sign of trouble, or at least on the more speculative end of the spectrum.
Amazon never split its stock again, and of course its stock continued to make fortunes for longtime investors.
Perhaps CEO Jeff Bezos is superstitious and attributes the company’s extraordinary run over the past few decades to not having split its shares since then. Another possibility could be that Bezos is taking a page from Warren Buffett’s playbook on Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), aiming to never split Amazon’s stock in order to attract long-term, buy-and-hold investors. After all, one of Amazon’s main competitive advantages is that it invests long-term, with a much longer time horizon than most other companies. Arguably, Bezos has been trying to attract the type of long-term buy-and-hold investor who aligns with Amazon’s business strategy. It has certainly paid off so far.
However, Berkshire Hathaway also unveiled a lower-priced second class B share in 1996, albeit with some reluctance. This was great news for smaller investors who at the time wanted to invest in Berkshire but couldn’t afford the $ 22,000 or so for A-shares. Today, Berkshire’s A-shares are trading at $ 331,000 per share and B shares at $ 220 cheaper.
Amazon’s stock price hasn’t gotten as out of reach as Berkshire’s, but given the incredible growth of Amazon’s business since the dot-com collapse, including the huge milestones of Amazon Prime’s launch in 2005 and the rise of Amazon Web Services, which took off in the 2010s, I would argue that Amazon’s business is much more resilient today.
Apple and Tesla’s recent price hikes around their stock splits may prompt Bezos to change his thinking about stock splits. After all, he has periodically sold out Amazon stock over the past few years, not because he was in trouble, but because Bezos personally financed his space exploration company, Blue Origin. As such, if Bezos thinks Amazon’s market valuation could get an incremental boost from a stock split and renewed interest from retail investors, it’s not out of the question that Amazon could undergo a split in the months or years to come.