As companies accumulate significant value over time, their stock prices can surge into the hundreds or even thousands of dollars, creating barriers for small investors. To address this, companies may consider a stock split, increasing the number of shares in circulation and consequently decreasing the price per share.
Although a stock split is primarily a cosmetic maneuver and does not alter the company’s intrinsic value, it often results in a short-term increase in stock price as a wider investor base eagerly jumps in.
Netflix Potential Split
Netflix is the dominant force in the streaming industry with 269.9 million subscribers, leaving rivals like Disney+ far behind. What sets Netflix apart is not just its massive content library but also its ability to turn a consistent profit. Generating $6.4 billion in net income over the last four quarters from $34.9 billion in total revenue, Netflix stands out as a streaming provider that can invest in content without bleeding cash.
Notably, Netflix is venturing into live programming, such as The Roast of Tom Brady, with plans for more live events like the Jake Paul vs. Mike Tyson boxing match. Additionally, Netflix secured a decade-long deal starting in 2025 to feature World Wrestling Entertainment (WWE) content, offering numerous live events each year.
With initiatives to attract lower-income subscribers through affordable membership tiers and an increasing focus on advertising-supported plans, Netflix continues to expand its viewer base. As it captures more screen time with its content, the company’s potential in TV advertising, estimated at $337 billion this year, is a significant financial opportunity. Currently trading at $690 per share, Netflix’s growth trajectory could push its stock price past $1,000, signaling a possible future stock split.
Meta Platforms Outlook
Meta Platforms stands as one of the few companies valued over $1 trillion yet to undergo a stock split. From its IPO price of $38 in 2012, Meta’s stock has surged by 1,321% to $539, highlighting its value creation prowess.
Home to social media giants like Facebook, Instagram, and WhatsApp, Meta Platforms serves a staggering 3.2 billion users daily, presenting a lucrative cash-generating engine with $45.7 billion in net income over the last four quarters from $142.7 billion in revenue.
Expanding its focus to artificial intelligence (AI), Meta unveiled the Llama language model, powering the innovative Meta AI chatbot integrated into its platforms. As businesses embrace Meta AI for customer queries and potentially sales, the company’s monetization prospects are vast, leveraging its history of successfully monetizing new features like Stories and Reels. Trading at $539, Meta Platforms offers substantial potential as it navigates the AI landscape.
Meta Stock Evaluation: A Deep Dive Into Forward P/E Ratios and Potential Growth
Assessing Meta’s Stock Potential Based on Forward P/E Ratio
With a current P/E ratio of 32.4, the Nasdaq-100 index indicates a valuation that some might consider steep. However, analysts project Meta to generate an EPS of $23.09 in 2025, translating to a forward P/E of 23.4. This implies that for Meta stock to align with the Nasdaq-100, it would need to surge by 38% by the end of the next year.
Potential Record High and Speculations on Stock Split
If Meta were to attain this growth, the stock price would reach a record high of $745. Given the positive momentum surrounding the company, there is speculation about a potential stock split before reaching this milestone.
Investment Considerations Beyond Meta: Learning from Historical Successes
Investors eyeing opportunities like Netflix may want to look beyond Meta’s trajectory. For instance, the Motley Fool Stock Advisor team identified 10 top stocks for investment, excluding Netflix. Looking back at historical successes, such as when Nvidia featured on a similar list in 2005, showcases the potential for extraordinary returns; a $1,000 investment back then would have amounted to $785,556.
The Stock Advisor service not only offers a roadmap to investment success but also boasts a track record that has outperformed the S&P 500 by a significant margin since 2002.
Final Thoughts
As investors navigate the complexities of stock evaluations and projections, it is crucial to consider multiple factors beyond just the current P/E ratios. Historical performances and emerging market trends can offer valuable insights into potential investment opportunities.
While Meta’s future remains uncertain, the broader landscape of investment options provides a diverse array of prospects for those willing to explore beyond the immediate allure of high-flying tech stocks.