A surge in popularity of stock splits has been the focus of attention in 2024, as a number of high-profile stocks have taken the plunge. Companies typically take this path after years, even decades, of strong operational and financial results that have pushed stock prices out of reach for some investors. Although a stock split doesn’t change the underlying value of the company, it makes the shares more affordable to employees and ordinary investors, a reason companies often cite as the primary motivation for splitting.
Investors should, however, focus on the strong results that ultimately led to the stock split, as this is historically an indicator of a company that is firing on all cylinders, which is a great reason to hold the stock .
Let’s take a look at two companies that still have significant upside prospects, according to some Wall Street analysts.
Nvidia: Implied increase of 59%
The first split action with rising mounds is Nvidia (NASDAQ:NVDA)The chipmaker was already the gold standard for graphics processing units (GPUs) used by gamers and in data centers. However, the advent of generative artificial intelligence (AI) early last year propelled its business into high gear.
The company is described as a “pickaxe and shovel company”. This reference to investing has its origins in a famous quote attributed to Mark Twain: “During the Gold Rush, it’s a good time to be in the pickaxe and shovel business.” » For the AI gold rush, Nvidia is providing the picks and shovels.
The parallel processing capability of Nvidia GPUs was revolutionary for rendering realistic images in video games. This allows them to perform a multitude of mathematical calculations simultaneously. It turns out that this same feature works just as well for processing AI.
Nvidia’s recent results show why most Wall Street analysts are optimistic. For the first quarter of its fiscal 2025 (ending April 28), Nvidia’s revenue jumped 262% year-over-year to a record $26 billion, while earnings per share (EPS) jumped 629% to $5.98. The company’s data center segment, which includes processors used for AI, became the company’s largest revenue generator, with revenue of $22.6 billion up 427 %.
Nvidia recently completed its much-publicized 10-for-1 stock split, and despite gains of over 194% over the past year (as of this writing), Wall Street remains remarkably bullish. Rosenblatt analyst Hans Mosesmann raised his price target to $200 while reiterating a buy rating on the stock. That represents a potential gain for investors of 59% from Tuesday’s closing price.
Growing demand for AI-centric processors forms the basis of the analyst’s thesis, but he believes the secret sauce lies in Nvidia’s proprietary software coupled with its best-in-class chips.
“We expect this software aspect to grow significantly over the next decade in terms of overall sales mix, with valuation on the rise due to sustainability,” Mosesmann wrote. The analyst’s price target suggests that Nvidia’s market will reach nearly $5 trillion over the next year.
Despite the stock’s epic run-up over the past year, Wall Street remains remarkably bullish on Nvidia. Of the 57 analysts who issued an opinion on the stock in May, 53 rated the stock as buy or strong buy, and none recommended sale.
Celsius Holdings: implied increase of 75%
Another split stock with significant upside potential is Securities in Celsius securities (NASDAQ:CELH). The company’s focus on health-focused energy drinks has been a hit with consumers. It is the third-largest and fastest-growing energy drink brand, contributing 47% of total industry growth in the first quarter, surpassing its biggest rivals Red Bull and Monster Drink.
Celsius occupies an enviable position in a growing sector. The energy drink category has continued to deliver robust growth over the past three years, even as the broader drinks category has seen contraction – and Celsius is leading the charge.
In the first quarter, revenue increased 37% year-over-year to $356 million, while diluted EPS jumped 108%. It’s always encouraging to see earnings growing faster than revenue, because it shows that a company has achieved the scale needed to further reduce revenue to net profit.
The company’s sales more than doubled last year thanks to its partnership with PepsiCowhich led the beverage and snack giant to invest $550 million in Celsius, take an 8.5% stake in the company and sign a long-term distribution agreement. It’s a double-edged sword, however, as Celsius now faces tough competition after such a record year.
Celsius Holdings completed its 3-for-1 stock split late last year on the back of its strong track record. However, fears of slowing growth have hurt the stock, which has lost 42% over the past month, but some on Wall Street are undaunted. Jefferies analyst Kaumil Gajrawala has a $98 price target and a buy rating on the stock. That represents a potential gain for investors of 75% from Tuesday’s closing price. The analyst noted that the pullback is “normal in the second year of the domestic distribution agreement” and advised investors to ignore the “near-term noise.”
The analyst isn’t the only one bullish on Celsius. Of the 16 analysts who gave their opinion on the stock in May, 14 rated the stock a buy or strong buy, and none recommended sale.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat buying the best performing stocks? Then you’ll want to hear this.
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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
See 3 “Double Down” actions »
*Stock Advisor returns June 24, 2024
Danny Vena holds positions at Monster Beverage and Nvidia. The Motley Fool holds positions in and recommends Celsius, Monster Beverage, and Nvidia. The Motley Fool has a disclosure policy.
2 Split Stocks to Buy in Bucks Before They Soar Up to 75%, Some Wall Street Analysts Say was originally published by The Motley Fool