Since the dawn of 2023, artificial intelligence (AI) has dominated Wall Street discussions. Yet, in 2024, the fervor surrounding stock splits has rivaled AI’s popularity. A stock split is a tool that public companies use to adjust share price and count without affecting market cap or operational performance.
Two types of splits exist, with one being notably more common. Reverse-stock splits aim to elevate a company’s share price, often ensuring compliance with stock exchange listing standards. Conversely, forward-stock splits lower the share price, making stocks more accessible for investors without fractional-share options. Forward splits, indicating operational strength, attract investors.
As of 2024, 13 established businesses have initiated or completed stock splits, mostly of the forward-split variety. While AI giants like Nvidia (4.55%) and Broadcom (2.48%) have dominated headlines, another stock-split contender is poised for attention.
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Nvidia and Broadcom: The AI-Driven Stock Splits of 2024
PwC analysts predict AI will contribute $15.7 trillion to the global economy by 2030, boosting consumption and productivity. Nvidia has become synonymous with AI’s rise, its market cap surging by $2.8 trillion since 2023, prompting a 10-for-1 forward split. This ascent is driven by Nvidia’s H100 GPUs, the top choice in AI data centers, controlling almost the entire market share in 2023.
Nvidia’s pricing power is evident, with H100 units priced between $30,000 and $40,000, surpassing competitors. Additionally, its CUDA platform, aiding developers in building language models, complements Nvidia’s hardware, maintaining customer loyalty.
Broadcom, a vital supplier of networking solutions, has introduced the Jericho3-AI fabric, connecting up to 32,000 GPUs in data centers. While its AI networking solutions have spurred a significant stock move, resulting in a 10-for-1 split, Broadcom’s expertise extends beyond AI. It leads in wireless chips for next-gen smartphones, meeting increased demand from telecoms upgrading to 5G networks.
While Nvidia and Broadcom shine, another outperformer unrelated to AI, boasting a 120,000% gain since its IPO (including dividends), is set to become Wall Street’s latest stock-split star.
Cintas: The Upcoming Stock-Split Star with a 120,000% Gain
On September 11, Cintas (0.49%), a corporate uniform and business services provider, will execute a 4-for-1 forward split, marking its sixth forward split since its 1983 IPO:
– April 1987: 2-for-1
– April 1991: 3-for-2
– April 1992: 2-for-1
– November 1997: 2-for-1
– March 2000: 3-for-2
– September 2024: 4-for-1
Cintas excels due to its diverse revenue stream and historical resilience. With over a million diverse clients and no single customer dominating sales, Cintas remains stable. Economic growth periods, typically longer than recessions, benefit Cintas’s customer base, increasing demand for its services.
Cintas’s success also stems from strategic acquisitions, like Omni Services, Zee Medical, and G&K Services, enhancing its product offerings and client retention.
Innovation is another key, as Cintas continuously introduces products and cross-selling solutions to boost client spending. Its robust capital-return program, with consistent dividend hikes since 1983, and a share repurchase program of $1.5 billion as of July 2024, showcases its financial strength.
However, Cintas’s valuation poses a challenge. With a forward price-to-earnings ratio of nearly 43 against an expected annual earnings growth of 13% through 2028, justification is tricky.
Should You Invest $1,000 in Cintas Now?
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Summary:
In 2024, stock splits have captured Wall Street’s attention alongside AI. Nvidia and Broadcom have led the charge with their AI-driven stock splits, capitalizing on the growing AI market. Meanwhile, Cintas, a non-AI outperformer, prepares for its own stock split, backed by diverse revenue streams, strategic acquisitions, and a strong capital-return program. Despite its success, Cintas’s valuation remains a concern. Investors should consider other top stock options identified by the Motley Fool Stock Advisor team.
