During periods of stock market growth, some stocks become too expensive for individual investors as their prices reach high valuation levels.
Companies may engage in stock splits to retain investors and make their stock more appealing. These splits do not affect the company’s market cap or financial performance but reduce the price per share, making the stock more accessible.
Investors typically prefer companies that perform forward splits because they are often operationally strong, outpacing their competitors, and often with clear competitive advantages.
Picks for you
Finbold analyzed the market and identified two stocks that are excellent investment opportunities due to their upcoming forward splits.
Chipotle Mexican Grill (NYSE: CMG)
During the Q1, investors eagerly added Chipotle Mexican Grill (NYSE: CMG) to their portfolios. In March, Chipotle announced a 50-for-1 stock split set to take effect on June 26, pending shareholder approval at the annual meeting.
Since its January 2006 IPO, Chipotle has been remarkably successful with over 7,000% increase in CMG stock price. Recognizing consumers would pay more for higher-quality food, Chipotle’s management avoided using freezers, chose responsibly raised meats, and sourced vegetables locally.
A key strategy has been maintaining a small menu, allowing quick meal preparation and efficient service while creating excitement with new menu items.
Chipotle’s innovation extended beyond its menu with the introduction of ‘Chipotlanes’—dedicated mobile-ordering drive-thru lanes. Introduced six years ago, these lanes gained significant popularity during the COVID-19 pandemic and created a new revenue stream.
Sony Group (NYSE: SONY)
Prominent investors eagerly bought Sony Group (NYSE: SONY) shares in the recent quarter. Although Sony announced its 5-for-1 stock split after the first quarter ended, the split—Sony’s first in 24 years—is set to take effect on October 8 for U.S. shares.
While demand for the PlayStation 5 has slightly declined since its November 2020 launch, revenue from PlayStation Plus is increasing. This high-margin service allows multiplayer gaming and cloud storage for gaming data, offering multiple subscription tiers.
Additionally, Sony is a leading provider of image sensors for smartphones, benefiting from the 5G revolution as consumers and businesses upgrade to devices with faster download speeds. With smartphone sales expected to rise in 2024, Sony’s imaging and sensing solutions are poised for growth.
Furthermore, Sony’s recently announced share repurchase program could retire up to 2.5% of its outstanding shares, potentially boosting its earnings per share (EPS).
Due to their decreased price and high potential upside, these two stocks present an ideal opportunity for investors to add them to their portfolios after announced stock splits.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
