Monitoring Split Indications: Could Palantir Be the Next One?
Last year, the term "stock split" became quite popular in the financial world. Companies like tech giant Nvidia, retail giant Walmart, and fast-food chain Chipotle Mexican Grill decided to implement this strategy, much to the delight of investors. But why does this excite us so much? While a stock split doesn't alter a company's fundamentals, it does lower the price of individual shares, making it easier for a broader range of investors to get involved. What's more, a stock split is usually a positive sign from the company, suggesting they're confident in the stock's future potential.
Now, the question on everyone's lips is: Which company might be the next to roll out a stock split? Companies that have seen significant growth in recent times are prime candidates. And one that fits the bill perfectly is the S&P 500's top performer in 2022, surging an impressive 340% - AI software player Palantir Technologies (PLTR 4.24%). Could this tech titan be the next to announce a split? Let's dive in.
Grasping Stock Splits
Before we delve into Palantir, let's clarify how stock splits work. Companies generally implement them when their share prices have skyrocketed over time. The operation involves issuing additional shares to current shareholders, which lowers the price of each share. For example, a $1,000 stock split into 10 shares would result in a post-split price of $100. A shareholder possessing just one share before the split would now own ten.
It's important to note that a stock split doesn't affect valuation, market capitalization, or your investment value if you're an existing shareholder. However, a lower share price makes investing more accessible to a wider demographic. Despite fractional shares, which allow buyers to invest in a portion of a share, not all brokerages offer them or appeal to shareholders who prefer full-share investing.
Palantir's Stock Market Journey
Although Palantir has been around for over two decades, its stock market existence spans just a few years. It debuted on the market in 2020. Palantir is a software company that offers platforms to governments and commercial clients, enabling them to use their data to make informed decisions and formulate strategies.
Following its IPO, Palantir's shares generally traded below $25. Through 2022, the stock dropped more than 30% from its IPO value. But in early 2023, the tech giant appeared to bounce back, and as of now, its share price has soared an astonishing 700% to hover around the $80 mark. This remarkable performance has raised questions about the stock's current value, which is over 165 times its forward earnings estimates.
Though a stock split would decrease the share price, it won't affect Palantir's valuation. And when it comes to the $1,000 psychological limit, Palantir's share price is still well below this threshold, unlikely to deter investors.
Palantir's Growth Catalysts
It's essential to remember that Palantir, despite its age, is still in its growth phase thanks to two driving factors. In 2023, Palantir introduced its Artificial Intelligence Platform, which has seen significant demand. Additionally, the company has witnessed growth in its commercial clientele and revenue from this segment.
With Palantir's current share price remaining relatively accessible to investors and its growth potential seemingly robust, is a stock split imminent for Palantir? Not necessarily. But, with this scorching stock continuing its climb, a split could become a possibility in the future.
Investors are closely watching Palantir Technologies, the S&P 500's top performer in 2022, due to its impressive 340% surge. If the company decides to implement a stock split, it could make investing in Palantir more affordable for a larger pool of investors.
Given the popularity of stock splits in the finance world and Palantir's recent growth, some analysts speculate that a split could be on the horizon for the tech giant. However, a stock split doesn't necessarily mean it will happen, as companies only opt for this strategy when their share prices become too high for many investors.
