Getting Closer to People: 5 US

Stocks Ready to Split in 2022who are ready to split securities before the end of the year,as well as the main candidates for the Tesla TSLA split$772.9 +5,4% Buy Amazon AMZN$2,265.33 +6,33% Buy Alphabet GOOGL$2,322.26 +3,07% Buy

This year is ambiguous for the US stock market. Despite the downward ripple in the S&P 500 broad market index, several large- cap stocks   managed to set new records. The reaction of some corporations was not long in coming. This year, three out of nine issuers   with the cost of one paper over $1,000 are planning to carry out split programs.

Share split (or share split ) - an increase in the number of outstanding shares due to a proportional split of each initial share. During this procedure, no new shares are issued. For example, a 3:1 split implies that 100 outstanding shares will become 300 after the split. Each holder of one share will receive two additional shares.

A stock split, as a rule, occurs in the event of a significant increase in the company's capitalization and an excessive rise in the cost of each security. After the split, the price of the shares becomes lower, and they themselves become more liquid. Depreciated securities are more accessible to retail investors with little capital to invest. In addition, the spread between the purchase and sale prices of shares narrows. We have compiled a selection of the top five companies in terms of brand awareness as well as large capitalization that are capable of splitting this year.

1.Tesla

Industry: Automotive
12-month consensus: $985

In March, the largest electric vehicle maker announced that it was planning a stock split. The Board of Directors approved this proposal, but the final decision on the proportion of the split will be known at the end of the annual meeting of Tesla shareholders, which will be held in the fall. The planned stock split could be the second in the company's history since its listing. The first and so far only Tesla split took place on August 31, 2020 in a 5:1 ratio.

Photo: Tesla

In the first quarter of the year, the company reported record revenue and net income. Revenue increased 81% year-on-year to $18.75 billion. Adjusted EBITDA for the same period soared 173% to $5.02 billion. Net income rose to a record $3.31 billion from $438 million a year earlier. Earnings per share (EPS) was $2.86 compared to $0.93 for the same period in 2021.

Tesla TSLA $772.9 (+5.4%) 1d 1d 1m 3m 1y All time Chart...

The company's capitalization is about $1 trillion, and the price of one share at the close of the market on May 12 is $728. Our long-term outlook for the stock is "cautious", although a stock split could "warm up" the quotes. In the next five years, there is a high probability of an increase in the average annual net income per share ( EPS   ) over 30%. Tesla expects to deliver at least 1.4 million electric vehicles this year, showing an increase of more than 50% over last year.

2. Amazon

Industry: Online retail
12-month consensus estimate: $1,018

In the first half of March, the world's largest online retailer also announced plans to split. He also announced an increase in the size of the share buyback program. After the announcement on March 9, Amazon shares gained 9% in one day. The company will conduct a stock split at a ratio of 20:1. The final decision will be made by the shareholders at the meeting scheduled for May 25.

April was the worst month for Amazon and GOOGLE stocks since 2008 Amazon , Alphabet , NASDAQ , S&P500 , Stocks

In the first quarter, revenue growth slowed down from 44% to 7%, but the long-term outlook for securities is “moderately positive”. Over a time horizon of five years, there is a high probability of an increase in average annual net earnings per share by more than 30%. Amazon CEO Andy Jassi said the company is working on cost optimization and seeing progress in customer service.

If the split is approved, the start of trading in the new mode is expected on June 6. If we assume that by this moment the price of one share will be $2,000, then after the split, the exchange will give $100 per share. Each investor registered in the share register on May 27, 2022 will receive 19 additional shares after the close of trading on June 3. At the close of trading on May 12, Amazon shares were worth $2,138.61, and the company's capitalization was about $1 trillion.

AMZN Amazon Forecast strength Morgan Stanley Buy Current price $2,265,33 Forecast $3,800 (+67.75%) Forecast date 04/29/2022 Fulfilled 04/28/2023 Forecast reliability Morgan Stanley2023 Morgan Stanley Forecast Reliability

3.Alphabet

Industry: IT
12-month consensus: $3,465

Shares of Google's parent company rose 11% in trading on Feb. 1 amid the announcement of the company's plans to conduct a share split. Alphabet intends to split Class A (GOOGL), Class B and Class C (GOOG) shares. After the split, each investor will receive 19 additional shares of the same class that he had at the time of the split into his account.

In the first quarter of 2022, Alphabet's revenue grew by 23% to $68.01 billion. In the same period of 2021, revenue grew by 34% against the background of economic recovery after the pandemic. Net income rose to $17.93 billion and EPS was $24.62. Revenues from division of Google Cloud grew by 44% and reached $5.82 billion.

Photo: Shutterstock

In our view, the long-term outlook for the stock remains positive. The consensus forecast of analysts for the company's securities for the next year is $3,465 per share. Over the next five years, average annual net earnings per share may increase by more than 30%. Alphabet is one of the top three companies in terms of share buybacks in 2021 — $13.5 billion in the fourth quarter. We also believe that share buyback programs will support the IT giant's stock prices in the long run.

4. BlackRock (split candidate)

Industry: finance
12-month consensus: $861

The largest investment company, asset manager, owner of SPDR and iShares class funds. The company's activities extend to all segments: from retail investments (35% of the total ETF market   , the first place among providers) to government debt management services (partner of the Fed under the QE program), and the total value of assets at the beginning of the year was about $10 trillion. The average return on BlackRock stock, including dividends, over the past ten years is over 20%.

The last share split of the company took place in June 2007. Taking into account the expectations to increase the Fed's key rate, we can predict further growth of BlackRock shares, primarily due to the growth in the cost of lending to securities transactions. Demand for instruments for passive investments continues to be relevant, so the long-term outlook for securities is “moderately positive”. Over the next five years, an average annual increase in net earnings per share of more than 7% is possible.

5. Booking Holding (split candidate)

Industry: Consumption
12-month consensus: $2,673

The shares of the owner of Priceline and the Booking.com platform have tripled over the past 10 years and exceeded $2,000 apiece. After the acute phase of the CORONAVIRUS pandemic has passed, the demand for tourism services is recovering. In addition to this, there is a seasonal increase in demand for booking services in the spring. Analyst consensus for 12 months is $2,673 per share. We believe CAGRs of over 40% in earnings per share (EPS) are possible over the next five years. The only stock split in the history of the company occurred in 1998 in a 2:1 ratio.

In the first quarter, total revenue rose 136% to $2.69 billion. The company's operating income was $174 million, compared with a loss of $311 million a year ago.

Photo: James Coleman / Unsplash

The HEAD of rival company Expedia, Peter Kern, said there are positive indicators of future activity in the summer. According to travel booking service Airbnb, more than 20% of users choose to stay longer than one month. We believe that the general trend in the industry could push Booking's shares higher and increase the likelihood of a stock split, and maintain our long-term positive outlook on the stock.

Recommendations for investors

It should be taken into account that the split does not change the capitalization of companies. There are three most possible scenarios for the development of events in the format of the neutral movement of the US common market:

growth of securities after the release of a message about the upcoming split of shares; growth of securities in anticipation of the split itself; a small “spurt” of shares up due to the split.

Repurchase of shares from the market is more effective as a tool to support quotes. Globally, massive stock splits are a sign that the US market is going through a major growth phase of the economic cycle and a possible sign of its impending reversal (deep correction   ). The current situation is not so clear, however, the upcoming splits of such giants as Tesla, Amazon and Alphabet may indicate the risks of maintaining volatility   on American exchanges.

The opinion of the authors, whose articles are published in the "Pro's Opinion" section, may not coincide with the position of the editorial board.

An exchange-traded fund that invests participants' funds in stocks according to a certain principle: for example, in an index, industry, or region. In addition to shares, the fund may also include other instruments: bonds, commodities, etc. The value of the company on the market, calculated from the number of company shares multiplied by their current price. Capitalization of the stock market - the total value of securities circulating in this market. Change in price over a certain period of time. Financial indicator in financial risk management. Characterizes the trend of price volatility - a sharp drop or rise leads to an increase in volatility. Read more A measure of how much a company can pay out of its net income per ordinary share. Exists in several versions. Face, issuing securities. The issuer can be both an individual and a legal entity (companies, executive authorities or local governments). A change in the rate of stocks or currencies in the direction opposite to the main trend of market prices. For example, the growth of quotations after a weekly decline in the price of a share. The correction is caused by the execution of stop orders, after which the movement of quotes resumes according to the main market trend.