Splits are often rocket fuel for stock prices. These 23 companies could do them in 2025, BofA says.
"After a split is announced, stocks have notched 25% total returns in the subsequent 12 months," Bank of America says.
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- Stock splits are resurging, with more in 2024 than any year since 2013, Bank of America says.
- High stock prices often lead to splits, offering lower entry points for investors.
- Splits usually precede a period of outperformance, BofA says.
The stock split is making a comeback.
More companies split their shares last year than in any year since 2013, and Bank of America says this trend could continue in 2025.
That creates some opportunities for investors, the bank's research shows.
Companies usually split their stocks because their high prices create a more difficult entry point for some investors. They do this by increasing the number of shares outstanding and proportionally reducing the price per share. For example, Nvidia's 10-for-1 split last year granted each shareholder an additional nine shares, while its price went from about $1,210 apiece to about $121.
For a stock price to climb high in the first place, it usually has to have seen significant upside.
"Stocks usually split after a consistent run of strong performance. Since 1980, companies that split have returned 28.4% annually for five years before their announcement with an average 67% return in the year before," the bank said in a client note authored by Jared Woodard, an investment & ETF strategist at BofA Securities.
That outperformance usually continues after the split, the bank said.
"After a split is announced, stocks have notched 25% total returns in the subsequent 12 months, compared to 12% for the broad index," the note continued. "Splits in 2024 are on track to outpace historical norms, with the average stock up 17% in the 6 months after their split."
Still, other factors are at play. If the macroeconomic picture is poor, stocks that split can still underperform. For example, as inflation soared in 2022, prompting Fed rate hikes and a bear market for the S&P 500, several stocks that split floundered.
"Companies like Amazon, Google, Tesla, and Dexcom struggled in the 12 months after splits were announced in 2022 as interest rates spiked," the note said. "More recently, Super Micro Computer is down about 50% since its split announcement in August 2024."
In the note, the bank identified a list of stocks with share prices above $500 — the most expensive 8% of stocks — making them prime candidates to split in 2025.
Below, we've included those on the list that Bank of America has also assigned a "Buy" rating. Performance over the last 12 months is also included.
Markets Insider
Ticker: ORLY
Sector: Consumer Discretionary
Return last 12 months: 24.7%
MarketWatch
Ticker: BLK
Sector: Financials
Return last 12 months: 38.1%
Markets Insider
Ticker: TDY
Sector: Information Technology
Return last 12 months: 18.3%
