In the realm of investing, few trends have captivated the masses like the rise of artificial intelligence. However, 2024 has seen another phenomenon gain significant traction: stock splits. This mechanism allows publicly traded companies to adjust their share price and outstanding share count, making their stock more accessible to everyday investors. While there are two types of stock splits, forward and reverse, investors overwhelmingly favor forward splits, which reduce a company’s share price.
This year, over a dozen prominent companies have announced or completed stock splits, with all but one being forward splits. One of the most affordable tech stocks set to undergo a split is preparing to take center stage this week. With high-flying stocks often drawing attention, it’s no surprise that AI-driven companies have been at the forefront of the stock split trend.
Nvidia and Broadcom, two AI leaders, have created significant buzz with their recent stock splits. Nvidia’s historic 10-for-1 forward split, which took effect in June, was a direct reflection of its dominance in high-compute enterprise data centers. Demand for its H100 graphics processing unit and next-generation Blackwell GPU platform has sent sales, profits, and gross margin soaring.
Broadcom followed suit with its own 10-for-1 forward split in July, driven by its AI networking solutions that connect GPUs in AI-accelerated data centers. While these companies have been the talk of Wall Street, they’re no longer the fundamental bargains they once were.
Enter Sony Group, a tech giant set to complete its 5-for-1 forward split later this week. This marks the company’s first split since 2000. Sony’s shares are expected to trade around $19 when the split takes effect. The company’s gaming division, which includes the top-selling PlayStation 5 console, has seen significant sales growth. Additionally, its subscription service, PlayStation Plus, has been a major contributor to revenue.
Sony’s Imaging and Sensing Solutions segment has also seen a 21% surge in sales, with operating income nearly tripling. The company’s capital-return program, which includes a share repurchase authorization of up to 30 million shares, is expected to increase earnings per share over time. With a forward price-to-earnings ratio of 15, Sony Group’s stock is reasonably cheap compared to its peers and the benchmark S&P 500.
As a result, Sony Group has the makings of a cheap stock-split stock that can be bought with confidence by opportunistic long-term investors.
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