High quality companies tend to create enormous amounts of value, sometimes pushing their price per share into the hundreds (or even thousands) of dollars. It may be too expensive for retail investors to buy in at that price (unless they use a broker that offers fractional shares), leaving institutional investors and large funds with a dominant slice of the pie.
A stock split can alleviate that problem by increasing the number of shares in circulation while organically lowering the price per share. Stock splits are entirely cosmetic and do not change the value of the underlying company, but they do make the shares more accessible to smaller retail investors.
Stock splits were popular in 2024
Several high-profile companies conducted stock splits this year:
-
Nvidia completed a 10-for-1 stock split on June 10, increasing the number of shares in issue tenfold and dropping the price per share from $1,200 to $120.
-
Chipotle completed a 50-for-1 stock split on June 26, dropping the per-share price from $3,283 to $66.
-
Broadcom completed a 10-for-1 stock split on July 12, dropping the per-share price from $1,700 to $170.
A new year is upon us and that has led some analysts to predict who could do stock splits in 2025. I think so Microsoft (NASDAQ: MSFT) And Metaplatforms (NASDAQ: META) could find their way onto the list. Of the six tech companies with valuations of $1 trillion or more, these two have the highest per-share prices.
They could become even more expensive as they expand their presence in the artificial intelligence (AI) industry. Here’s why they could all benefit from a split.
Image source: Getty Images.
1. Microsoft: A potential 3-for-1 stock split in 2025
Microsoft has completed nine splits since its shares went public in 1986. The company has created a whopping $3 trillion in value for investors over the past 38 years, and if it hadn’t gone through splits, the stock would be trading for $119,500 today!
Microsoft’s most recent split took place over two decades ago, in 2003. The company’s shares are trading at $415 at the time of writing, so another split may follow in the near future – mainly due to the potential value that the company will create thanks to its investments in AI.
Microsoft is a major investor in ChatGPT maker OpenAI and has used the startup’s technology to create the virtual assistant Copilot, which is embedded for free in its flagship software products such as Windows, Bing and Edge. However, users of 365 productivity applications, such as Word, Excel, and PowerPoint, can also add Copilot to their subscriptions for an additional monthly subscription fee.
Copilot can accelerate workflows in 365 by quickly generating text and image content as well as answering complex questions on a range of topics. Organizations around the world pay for 365 software licenses (currently over 400 million), all of which are eligible for the Copilot add-on, so this could be a huge financial opportunity for Microsoft.
Then there is Microsoft Azure, one of the largest providers of cloud services in the world. It is a go-to destination for developers looking for state-of-the-art computing infrastructure and turnkey large language models (LLMs), like OpenAI’s latest o1 series, which are the key ingredients for creating powerful AI software applications .
Azure revenue rose 33% year over year in the recent first quarter of fiscal 2025 ending September 30, and 12 percentage points of that growth came specifically from AI services. That was up from 8 points in the previous quarter just three months earlier, and the figure has accelerated in every quarter since Microsoft started reporting it more than a year ago. This company could be a major source of share price appreciation in the coming years.
If Microsoft goes through a 3-for-1 split, its stock will fall to $138 per share, which would make it more accessible to smaller investors. It would also put it in line with other trillion-dollar tech giants like Nvidia. Amazon, AlphabetAnd Applewith stock prices between $100 and $250.
2. Metaplatforms: A potential 10-to-1 stock split by 2025
Metaplatforms has never I have done a stock split, but I think it could happen in the near future. The company went public in 2012 at a price of $38 per share, but has since risen to $554, which is the highest price tag of any tech stock in the billion-dollar club.
Meta is the parent company of the social networks Facebook, Instagram and WhatsApp, which serve nearly 3.3 billion people around the world every day. The company generates most of its revenue from selling advertising spaces to companies, so the longer each user spends on the company’s platforms, the more ads they will see and the more money Meta will make.
The company boosts engagement by using AI algorithms to learn what each user likes to see so it can curate its content feeds to capture attention. Meta CEO Mark Zuckerberg says this strategy has led to an 8% increase in the amount of time each user has spent on Facebook so far this year and a 6% increase for Instagram.
Releasing new features also helps increase engagement. Meta last year launched an AI-powered virtual assistant called Meta AI, which users can access through any of the company’s social apps. It can generate text and images and even join your group chat to settle debates with friends or suggest fun activities. Meta AI had amassed 500 million monthly active users as of Q3 2024 (ending September 30), so it’s on track to become one of the company’s most popular products.
Meta AI is powered by Llama, an LLM that Meta built in-house. The company is on track to invest up to $40 billion this year in data center infrastructure, which will provide enough computing power to launch Llama 4 in 2025. It will be Meta’s most powerful LLM yet, and Zuckerberg says it has the potential to lead the entire industry.
Meta stock trades at a price-to-earnings (P/E) ratio of 21.9, based on Wall Street’s consensus forecast for the company’s earnings per share through 2025. That means the stock should gain 71% next year rise to trade in line with the 10-year average price-to-earnings ratio of 37.5, implying a share price of $947.
I think Meta should consider a split now, but a 10-to-1 split could be a no-brainer decision if the stock gets close to four figures next year.
Should You Invest $1,000 in Microsoft Now?
Before you buy shares in Microsoft, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $900,893!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns November 18, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Chipotle Mexican Grill, Meta Platforms, Microsoft and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft, short December 2024 $54 calls on Chipotle Mexican Grill, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
