The stock split has enjoyed a resurgence in recent years, fueled by a rising market and robust share price gains.
Broadcom and AppLovin have generated spectacular gains for investors, leading to speculation that they may adopt stock splits.
Both are selling at attractive valuations.
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Stock splitting was common in the late 1990s, but the practice fell out of favor and almost faded into obscurity. However, in recent years, stock splits have experienced a resurgence as a means of keeping popular and high-flying stocks accessible to the masses.
Moreover, the emergence of artificial intelligence (AI) and strong corporate results have fueled a robust market that just passed its third birthday, driving share prices to 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) they have all has reached record highs in recent months and more are likely to follow.
Ryan Detrick, chief market strategist at financial services firm Carson Group, analyzed the data, which shows that durable bull markets longer for three years continues to climb, lasting eight years, on average, with even the shortest with a duration of five years.
With that as a backdrop, let’s look at two unstoppable stocks that have risen over the past two years but are still bought right now, according to Wall Street.
Image source: Getty Images.
The AI revolution continues to gain momentum, but is beginning to expand its reach. Graphics processing units (GPUs) were the first 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 for speed and flexibility, this comes at a high power consumption cost.
There Broadcom(NASDAQ: AVGO) The company provides 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 very efficient when performing a specific task — hence the name — and therefore be more energy efficient for those use cases.
Broadcom recently struck a multi-billion dollar deal with ChatGPT creator 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 them with these specialized chips. In total, Broadcom believes its AI opportunity will grow to $60 billion to $90 billion by 2027 from its existing customers, and the new deals could increase that range.
Broadcom is keeping its customer list close to the vest, but is believed to supply specialized processors to some of the biggest names in tech, including AlphabetGoogle’s Meta platformsand ByteDance, the parent of TikTok.
Of the 47 analysts who have provided an opinion so far in December, 94% rate the company a buy or strong buy and none recommend for sale.
At over $400 a share, Broadcom could be primed for a stock split, especially if it continues to grow at its current rate.
At 32 times next year’s expected earnings, Broadcom might look expensive. However, most commonly used valuation metrics struggle to value high growth stocks. A more appropriate price-to-earnings-growth (PEG) ratio is 0.43, where any number less than 1 suggests an undervalued stock.
Once upon a time, software and app advertising was fraught with uncertainty because marketers had no way to know for sure if they were getting bang for their buck. AppLovin (NASDAQ: APP) he was there to answer the call. The adtech 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 range of cutting-edge tools that are industry-leading. Its self-service Axon advertising platform enables users to automate and manage their creative campaigns, while AppLovin’s Max sourcing platform helps connect publishers and advertisers in real-time. The company’s success has been marked by its recent admission to the S&P 500 and a stock price increase of more than 1,700% over the past two years.
This combination reaps big rewards and fuels explosive growth. In the third quarter, revenue of $1.4 billion was up 68% year-over-year, while diluted earnings per share (EPS) of $2.47 were up 96%. The results were driven by net revenue per installation, which increased 75%. Perhaps more significant were the $1.05 billion in operating cash flow and $1.05 billion in free cash flow generated by AppLovin during the quarter.
Wall Street is clearly bullish on the company’s future prospects. Of the 27 analysts who have provided an opinion so far in December, 81% rate the company a buy or strong buy, and only one maintains a sell rec.
AppLovin’s stock is currently trading at more than $700 per share, making it ripe for a split, especially in light of the company’s consistent double-digit growth.
Like Broadcom, AppLovin defies most common valuation metrics, trading at more than 50 times next year’s expected earnings. However, the PEG ratio of 0.63 suggests that the stock is attractively priced for a company that is growing its revenue and profits so quickly.
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Danny Vena, CPA has positions in Alphabet, Broadcom and Meta Platforms. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Possible Stock Splits in 2026: 2 Unstoppable Stocks Up 337% and 1,780% in 2 Years to Buy Now, According to Wall Street was originally published by The Motley Fool
