As Wall Street navigates the final stretch of 2024, two stock-split stories stand out from the crowd. One, a hidden gem, is poised to reward value-conscious investors, while the other, a high-flying darling, may be due for a reality check.
The first company, Sirius XM Holdings, has flown under the radar since announcing its merger with Liberty Media’s tracking stock and subsequent 1-for-10 reverse split. This unique move has created a single class of stock, making it more appealing to institutional investors. With a predictable cash flow stream, driven by subscription revenue, Sirius XM boasts a moat that allows it to maintain pricing power even in uncertain economic times. Currently trading at a bargain-basement valuation of 7.5 times estimated 2025 earnings, this stock is ripe for the picking.
On the other hand, Nvidia, the artificial intelligence powerhouse, has been riding high on its 10-for-1 forward split. While its dominance in AI-graphics processing units and CUDA software platform are undeniable, warning signs are emerging. Competition is looming, and internal threats from its top customers developing their own AI-GPUs can’t be ignored. Furthermore, insider selling and the lack of a clear return on investment for many businesses using AI technology raise concerns about a potential bubble burst. As the investing community has historically overestimated the adoption of next-big-thing technologies, it’s wise to approach Nvidia’s parabolic ascent with caution.
Leave a Reply