2 Brilliant Stock Split Stocks to Buy on the Dip and Hold for 10 Years

Key Points

• Netflix and Booking Holdings have conducted stock splits over the past year.

• Both stocks have declined 25% due to company-specific issues.

• There remain good reasons to be optimistic about their prospects.

• 10 stocks we like better than Netflix ›

Netflix (NASDAQ: NFLX) and Booking Holdings (NASDAQ: BKNG) are two of the most prominent corporations on Wall Street that conducted stock splits over the past year. This hasn’t helped either company beat the market. Both have significantly lagged broader equities over this period. However, Netflix and Booking Holdings have qualities that may allow them to turn things around and deliver competitive returns over the next decade, making them attractive buys on the dip. Here’s the rundown.

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1. Netflix

A lot has happened with Netflix over the past year. The company tried — and failed — to acquire Warner Bros., an attempt that some investors, analysts, and lawmakers opposed. It also raised its prices once again, which wasn’t well received. Elsewhere, Netflix’s co-founder, former CEO, and executive chairman, Reed Hastings, announced that he will not seek reelection to the board of directors, marking the first time since Netflix’s founding that he will not have a role within the company.

Before all that, though, Netflix conducted a 10-for-1 stock split, which took effect on Nov. 17. The stock is currently trading at around $88 per share, down 25% over the past 12 months. Netflix’s most recent financial results have a lot to do with that. When announcing its first-quarter update on April 16, the company’s guidance came in below expectations, sending the stock price sharply lower.

Can Netflix bounce back? I believe so. The company still has a massive addressable market in the streaming industry, which commands less than 50% of television viewing time in the U.S., according to Nielsen. Netflix’s basic blueprint hasn’t changed, but the company has evolved. It is increasingly entering corners of the streaming market, such as live sports and long-form video podcasts, that it doesn’t yet dominate. Netflix’s strong brand name could help it capture significant market share here and boost engagement on its platform.

The company also continues to scale its advertising business, which could turn into an attractive long-term growth driver. Lastly, Netflix should continue creating winning content to strengthen the network effect of its platform, driving growing subscriptions, revenue, and earnings, along with a strong stock performance. At below $90 per share, Netflix looks like an attractive long-term bet.

2. Booking Holdings

Booking Holdings performed a 25-for-1 stock split. Shares began trading on a split-adjusted basis on April 6. The move was a bit surprising, given that Booking Holdings CEO Glenn Fogel had previously said he “did not want” the kind of investor who was turned off by the high share price. Nevertheless, given that shares were trading above $4,000 each, the split was well received by many investors.

The company is facing some challenges, though. Notably, some people are increasingly worried that artificial intelligence (AI) will disrupt Booking Holdings’ services. Moreover, recent financial results, although not terrible, haven’t been as strong as the market wanted. Still, there are reasons why Booking Holdings may perform well over the next decade. First, the company sees significant growth opportunities worldwide, particularly in Asia, which it considers the world’s fastest-growing travel market.

Second, Booking Holdings benefits from a strong moat from network effects. The company’s ecosystem includes several websites that partner with hotels, airlines, car rental services, activities, etc. The more travelers use its platform, the more attractive it becomes to companies offering a range of travel services and accommodations, and vice versa. Booking Holdings is one of the leaders in its niche, and its moat makes it likely to remain so.

Third, Booking Holdings is increasingly looking to improve its services through AI. The company has launched various AI tools across its websites that make it easier for its customers to find what they want, for instance. Booking Holdings’ shares are down 25% over the past year, but given its attempts to improve its business, its strong competitive edge, and the vast addressable market ahead, the stock could still deliver solid returns over the next decade.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Booking Holdings, Netflix, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.