A stock split is generally a positive sign that the company (and its stock) is doing well. Splits do not change the true value of an investor’s holdings in a company, they simply divide the holding into smaller pieces. But at a lower price, a stock can become more accessible and attractive to more investors. It is also an indicator of the success of a title; stocks that split normally do so because their prices are high.
However, not doing a stock split doesn’t necessarily mean a stock is doing poorly. Costco wholesale (NASDAQ: COST) the stock is currently trading around the $700 mark. The company could easily split its shares and still maintain a fairly high price.
Is a stock split likely for Costco in 2024?
Costco’s last stock split was in 2000
The last time Costco management did a stock split was in the early 2000s, when the warehouse club retailer split its stock on a 2-for-1 basis. other splits in the 1990s, but nothing in over two decades.
If the company were to do a stock split this year, it would likely be even more of a 2-for-1 split, as that would still put the stock at a relatively high price of $350. A 7-to-1 split, for example, would put it at around $100. There are no hard and fast rules for the share price resulting from a split, but a review of splits by other companies in recent years indicates that it is popular to aim for $100 per share.
A high stock price does not mean a split is inevitable
While Costco is among the most expensive stocks on the market, S&P500, there are even more expensive stocks that have not been subject to stock splits. Actions of Chipotle Mexican Grill is trading above $2,300, while homebuilder NVR has a stock price of over $7,400. A high price alone is not enough to suggest that a stock split is inevitable. Neither Chipotle Mexican Grill nor NVR have ever completed a stock split in their history.
Ultimately, it all comes down to management and their preferences. Warren Buffett Berkshire Hathaway has two classes of stock: its original Class A, which today costs more than $550,000 and has never split, and Class B, which is more modestly priced and trades at around $370 and which has divided several times since its launch. in 1996. But, besides the price, there is there is virtually no real difference in stock ownership.
Why Costco probably won’t split this year
If Costco were to do a stock split, it would likely do so in 2022, along with the many other large stocks that have initiated splits, including Amazon, AlphabetAnd You’re here.
That year, Costco shares also reached highs of around $600, and there arguably would have been more reason to do a split back then, when stock splits attracted a lot of attention. attention from investors. Costco’s reluctance to split its shares at the time suggests to me that it won’t do so anytime soon.
Costco is doing well where it matters most: the bottom line
At a time when fractions of shares are more easily accessible, stock splits should not matter to investors. What’s important is business performance, and in Costco’s case, the company’s financial results remain impressive. In its most recent quarter (ended November 26, 2023), Costco reported revenue of $57.8 billion, growing 6% year-over-year. Profit of about $1.6 billion rose 16%.
Costco’s strong customer loyalty and brand make it one of the best growth stocks to buy and hold for the long term. The company has performed well in a myriad of economic conditions over the past few years, demonstrating its overall strength and versatility.
While Costco stock is not a cheap buy, trading at nearly 50 times current earnings, with continued growth and plenty of opportunities to expand internationally, it has the potential to be a solid investment for years to come, no matter how much more than that. average share price.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Alphabet, Amazon, Berkshire Hathaway, Chipotle Mexican Grill, Costco Wholesale, NVR and Tesla. The Mad Motley has a disclosure policy.
Should Costco do a stock split in 2024? was originally published by The Motley Fool
