We recently published a list of 10 Stocks That May Be Splitting Soon. In this article, we are going to take a look at where Booking Holdings Inc. (NASDAQ:BKNG) stands against the other stocks that may be splitting soon.
Understanding Stock Splits
A stock split is when a company literally splits its stocks – it divides its existing shares into multiple new shares. This increases the number of shares outstanding without changing the company’s overall value while making the stock more affordable and accessible to smaller investors.
A company’s board of directors determines the ratio of a stock split. This can range from a common 2-for-1 split, and go as far as 100-for-1, or more. For instance, in a 2-for-1 split, each existing share is divided into two new shares. The price per share is reduced by half, but the total market capitalization remains unchanged. So, a stock split can increase liquidity and potentially attract more investors, by giving 2 shares valued at $50, instead of 1 at $100, and the company’s market cap is not impacted.
As the share price adjusts downward, dividends per share will also be adjusted to maintain the same total dividend payout. Similarly, all things tied to the share price are adjusted according to the split. However stock splits are non-dilutive, so existing shareholders’ voting rights remain unchanged.
Stock splits aren’t just beneficial to small investors trying to buy shares in big companies, they can also benefit companies by allowing them to repurchase shares at a lower price. But in one way or another, the eventual goal is to enhance a stock’s appeal to investors and make it more accessible to retail or individual investors.
At the end of the day, a stock split does not inherently create additional value for a company, a good company remains a good company after a stock split. Similarly, a bad company remains a bad company. A temporary reduction in share price followed by higher investor interest might cause the stock to surge in the short run, but no meaningful impact should be expected in the long run.
Experts Weight In on The Market Situation Right Now
We’ve seen a range of high-profile stock splits in 2024, especially in the semiconductor space. They seem to be the new cool thing to do for every company. However, these moves should be treated as no more than just making shares more accessible to smaller investors, and value investors should focus on fundamentals when they’re contemplating their next best idea.
The markets have been on a wild ride, all thanks to AI. The valuations have gotten out of hand, but we’ve also seen some corrections. Analysts are expecting earnings growth of 15% in 2025 along with rate cuts of up to 225 basis points. The Fed is expected to deliver its first cut in September after hiking interest rates constantly and holding them higher for longer. Jeff Krumpelman, the chief investment strategist at Mariner Wealth Advisors, and Julie Biel, the chief market strategist at Kayne Anderson Rudnick, recently appeared together on CNBC to discuss these dynamics and both had similar but contrasting opinions.
Krumpelman expressed optimism, citing strong fundamentals and improving economic indicators, particularly inflation. He believes we’re not in a recessionary scenario and sees potential for the S&P 500 to reach 6,000 by mid-2025, driven by solid earnings growth, healthy guidance, and projected GDP growth of 1.5% to 2.0%. Here’s what he said:
“We look at the individual stocks, we find a broadening market, and we find general health in terms of earnings growth and valuation. So, we’re optimistic and constructive.”
Biel, on the other hand, raised concerns about potential risks related to high valuations making stocks more fragile. She emphasized that the last time the market was this optimistic was back in 1984, just once in modern history. Biel remained cautiously optimistic and pointed to the $1 trillion in credit card debt and rising delinquency rates.
Most successful companies have a history of stock splits, but their share prices consistently return to levels where another split is warranted. Yet it is a widely practiced phenomenon and investors globally anticipate such moves from big companies to improve trust. In this context, we’re going to talk about the top 10 stocks that may be splitting soon.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A fast-paced travel agent making a bookings for a family vacation package.
Booking Holdings Inc. (NASDAQ:BKNG)
Share Price as of August 30: $3,907.57
Number of Hedge Fund Holders: 96
Booking Holdings Inc. (NASDAQ:BKNG) is an American travel technology company that owns and operates several travel fare aggregators. It owns and operates several popular travel websites, including Booking.com, Priceline, Agoda, Kayak, and OpenTable, providing platforms for hotels, flights, rental cars, and vacation packages.
Booking.com saw slower room night growth in Q2 due to a smaller booking window expansion and moderating European travel growth. Still, travelers booked 287 million room nights across the company’s platforms, increasing 7.27% year-over-year improvement in revenue. The revenue recorded was $5.86 billion, with an earnings per share value of $41.90. Repeat travelers are growing quickly.
By the end of Q2, the alternative accommodation listings rose 11% from last year, boosting bookings. The Genius program boosts direct bookings, with nearly 30% of travelers in higher tiers and a 15% increase in benefits. Merchant bookings grew to 58% of total bookings in Q2, with connected transactions up 45%. Flight bookings increased 28% year-over-year.
The company remains optimistic for the remainder of 2024, focusing on strategic initiatives such as connected trips, expanded merchant offerings, AI development, and loyalty program enhancements, while prioritizing cost efficiencies. For the full year, management expects gross bookings growth to exceed 6%, slightly below previous forecasts due to lower flight prices. Revenue growth is projected over 7%, slightly higher than before.
In 1 year, the company’s share price also rose 24.70%. Most companies might not go towards a stock split on such an increase, but since Booking Holdings Inc. (NASDAQ:BKNG) has already observed a stock split once in 2003, the company might resort to it again considering its high share price. 96 hedge funds are long on it. The biggest stake is valued at $1,605,652,190, held by Fisher Asset Management, as of June 30.
Wedgewood Partners stated the following regarding Booking Holdings Inc. (NASDAQ:BKNG) in its Q2 2024 investor letter:
“Booking Holdings Inc. (NASDAQ:BKNG) contributed to performance as travel spending across the U.S. and Europe remains quite healthy, whereas the Company took share in alternative accommodations, and looks set to expand margins after a few years of reinvestment. The Company has also been aggressively reducing its share count at reasonably attractive valuation multiples. Booking should be able to compound earnings at an attractive, double-digit rate for the next few years given these various initiatives.”
Overall BKNG ranks 2nd on our list of stocks that may be splitting soon. While we acknowledge the potential of BKNG as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BKNG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.