Market Volatility and Stock Splits
The past few years have seen the stock market swinging wildly, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite assuming the role of a seesaw. This pendulum-like motion has created an environment of uncertainty, prompting investors to gravitate towards companies with a proven track record of success. Notably, those that have undergone stock splits have commanded considerable attention.
The Anatomy and Appeal of Stock Splits
Stock splits, a cosmetic maneuver for publicly traded companies, modify share prices and outstanding share counts without impacting market caps or operations. They can render shares more accessible to retail investors (forward-stock split) or prop up a company’s share price for continued exchange listing (reverse stock split).
While some businesses have thrived post reverse-stock splits, the primary focus lies on companies opting for forward-stock splits. Typically, these are high-performing firms that have outpaced their competitors.
Stock Split Stars of 2024
Nine prominent companies executed forward-stock splits since mid-2021. These companies are industry dominators with significant competitive strengths. Nvidia, Amazon, Tesla, and DexCom are prime examples, excelling in areas like AI, e-commerce, EV manufacturing, and healthcare technology.
The Standout: Alphabet
Among these nine, Alphabet shines as the standout stock-split stock to bet on in 2024. The parent company of Google and YouTube occupies a dominant position but faces cyclicality, with ad revenue representing a significant proportion of its income.
However, Alphabet’s susceptibility to economic downturns is not reason enough to disregard its potential. Historical trends indicate that ad-driven businesses are well-poised for success during periods of economic expansion. Google’s unwavering stronghold on global search further cements Alphabet’s competitive advantage, translating into exceptional pricing power for advertisements, regardless of economic conditions.
The new year may hold even more promise for Alphabet, particularly with flourishing segments like YouTube and Google Cloud tapping into new growth prospects.
Looking Ahead
The bull market and economic variables might appear confusing as we step into 2024. However, amidst the tumult, the allure of stock-splits stocks like Alphabet raise intriguing prospects for investors. As historical data and market conditions intertwine, it’s worth exploring the potential opportunities that lay in wait.
Unraveling the Future: A Look at FAANG Stocks in 2024
An in-depth review of Alphabet’s potential in 2024
Amidst the heavily scrutinized status of the FAANG stocks, Alphabet stands out as an intriguing prospect. Despite sustained double-digit earnings growth potential, the stock can be purchased for roughly 14 times estimated cash flow per share in 2024. This represents a 20% discount to its average multiple to cash flow over the past five years.
The Model 3 is Tesla’s top-selling sedan. Image source: Tesla.
Challenges Ahead: The Case Against Tesla in 2024
Quoting the timeless investment disclaimer that ‘past performance is no guarantee of future results’, it’s evident that Tesla, despite its historic resilience, presents a stock to avoid in 2024. While commendable for being the only pure-play EV manufacturer profitable on a recurring basis, Tesla faces challenges that cannot be overlooked.
Its first-mover advantages are starting to diminish, highlighted by a declining operating margin of 7.6% over the trailing year. The company’s reliance on unsustainable sources for a significant portion of its pre-tax income raises serious concerns. Additionally, Elon Musk’s penchant for overpromising and under-delivering, along with a staggering valuation of 65 times consensus earnings, compounds the apprehensions about Tesla’s sustainability in the face of a deteriorating operating margin.
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