Stock splits have enjoyed a resurgence in recent years, spurred by bull markets and strong stock price gains.
Broadcom and AppLovin have generated spectacular gains for investors, leading to speculation that they may implement a stock split.
Both are being sold at attractive prices.
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Stock splits were common in the late 1990s, but the practice fell out of favor and faded into near obscurity. In recent years, however, stock splits have experienced a resurgence to keep popular and high-flying stocks accessible to the public.
Furthermore, the advent of artificial intelligence (AI) and strong corporate results have fueled a strong bull market that recently passed its third anniversary, with share prices reaching highs not seen in years. Don’t take my word for it: The Dow Jones Industrial Average(DJINDICES: ^DJI), S&P 500(SNPINDEX: ^GSPC)and Nasdaq Composite(NASDAQINDEX: ^IXIC) is all Record highs have hit in recent months, and there’s likely to be more.
Ryan Detrick, chief market strategist at financial services company Carson Group, analyzed the data, which shows that bull markets are enduring. long The climb continues for more than three years, up to eight years, on average, even the shortest Lasting five years.
As background, let’s look at two unstoppable stocks that have rallied over the past two years but are still bought, according to Wall Street.
Image source: Getty Images.
The AI revolution continues to gain steam, but its reach is beginning to expand. Graphics processing units (GPUs) were the initial chip of choice to power the large language models (LLMs) that underpin AI. However, as the use of AI continues to evolve, so do the needs of its users. For example, while GPUs are unmatched in terms of speed and flexibility, this comes at the cost of high energy consumption.
right there Broadcom(NASDAQ: AVGO ) comes in The company offers application-specific integrated circuits (ASICs) that are hailed as a viable alternative to power-hungry GPUs. ASICs are specialized semiconductors that can be customized to be highly efficient at performing a specific task – hence the name – and therefore to be more energy efficient for those use cases.
Broadcom recently signed a billion-dollar deal with ChatGPT maker OpenAI to supply 10 gigawatts of ASICs over the next four years. This could be just the beginning, as the company is “deeply involved” with other hyperscalers to supply these special chips. Overall, Broadcom believes its AI opportunity will reach between $60 billion and $90 billion from its existing customers by 2027, and new deals could push that range higher.
Broadcom keeps its customer list close to the vest, but is believed to supply specialized processors to some of the biggest names in technology, including Alphabetgoogle, Meta Platformsand TikTok parent ByteDance.
94% of the 47 analysts who provided opinions so far in December rated the company a buy or strong buy, and any Recommend to sell.
At more than $400 a share, Broadcom could be ripe for a stock split, especially if it continues to grow at its current rate.
At 32 times next year’s expected earnings, Broadcom may look expensive. However, most commonly used valuation metrics struggle to value high growth stocks. A more appropriate price/earnings-to-growth (PEG) ratio clocks in at 0.43, while any number below 1 suggests an undervalued stock.
Once upon a time, advertising in software and apps was fraught with uncertainty, as marketers had no way of knowing for sure whether they were getting a bang for their buck. AppLovin (NASDAQ: APP ) were there to answer the call. The edtech company offers a suite of tools to help app developers market and monetize their apps. AppLovin is expanding its offerings, creating a new generation of solutions designed specifically for e-commerce platforms.
The company offers a number of industry-leading state-of-the-art tools. Its Axon self-service advertising platform enables users to automate and manage their creative campaigns, while AppLovin’s Maximize supply-side platform helps publishers and advertisers connect in real time. The company’s success was marked by its recent entry into the S&P 500 and a stock price increase of more than 1,700% over the past two years.
This combination is reaping big rewards and fueling seasonal growth. In the third quarter, revenue of $1.4 billion was up 68% year over year, while its diluted earnings per share (EPS) of $2.47 rose 96%. The results were driven higher by net revenue per install, which grew 75%. Maybe it was $1.05 billion in operating cash flow generated during the quarter and $1.05 billion in free cash flow at AppLovin.
Wall Street is clearly bullish on the company’s future prospects. Of the 27 analysts offering opinions so far in December, 81% rate the company a buy or strong buy, and only one has a sell recovery.
AppLovin stock currently sells for more than $700 per share, making it ripe for a split, especially in light of the company’s consistent mid-double-digit growth.
Like Broadcom, AppLovin defies more common valuation metrics, selling at more than 50 times next year’s expected earnings. However, its PEG ratio of 0.63 suggests that the stock is attractively priced for a company that is rapidly growing its revenue and profits.
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Danny Vena, CPA has positions at Alphabet, Broadcom, and Meta Platforms. The Motley Fool has posts on and recommends Alphabet and Meta Platforms. The Motley Fool recommends Broadcom. Motley Fool has a disclosure policy.
Potential Stock Splits in 2026: Buy Now 2 Unstoppable Stocks Up 337% and 1,780% in 2 Years, According to Wall Street was originally published by The Motley Fool.
