The recent market rally has greatly surpassed the expectations even bulls had two years back. This also means that the stocks of certain companies have gotten out of reach for everyday retail investors. Some are changing hands at quadruple-digit valuations, and even if investors can buy fractional shares, there’s still some friction, as having whole shares sounds much better, at least on paper.
We’ve seen an above-average number of stock splits in the past two years. The first half of 2024 saw the highest number of split announcements in a decade. This includes reverse splits too, but the bullish trend is pretty clear.
2025 has just started, but if the market continues to climb this way, the number of stock splits will likely go up. Since stocks become more accessible to retail investors after a stock split, the announcement is usually followed by some sort of a rally. A stock split is also a vote of confidence that the company’s management thinks the fundamentals are strong enough to keep the stock climbing even higher. As such, it’s a good idea to look into some potential stock split candidates.
Here are three:
NVR Inc (NYSE:NVR) has always traded with a premium valuation as it is one of the largest homebuilders in the U.S. and also has an asset-light business model that consistently generates cash.
The stock now trades at $8,345 as of writing. It was nearly $10,000 last year at one point, but it is still squarely out of reach for most retail investors. Even a tenth of the stock is more expensive than most other stocks in the market. Thus, a split will likely bring a lot more money in and potentially even ignite a recovery rally.
Regardless of whether or not a stock split happens, NVR has solid profits, and that should eventually cause a recovery. It now trades at 17 times forward earnings. The growth has slowed down, with revenue growing 7% year-over-year to $2.68 billion. However, with the net margin at 16% and a return on equity above 38%, I wouldn’t worry too much about it.
The housing market is still pretty strong and NVR’s backlog grew 9% in units and 11% in dollar value to $5.32 billion. The board also authorized $750 million in share repurchases in December and the debt-to-equity ratio is just 0.25 times.
A stock split this year will very much sweeten the deal for a lot of investors.
Booking Holdings (NASDAQ:BKNG) also declined recently. It was trading over $5,200 last year but is now near correction territory due to broader market concerns about the travel sector’s valuations. It owns Booking.com, Priceline, Agoda, KAYAK, and OpenTable.
Booking Holdings posted $8 billion in Q3 revenue but lowered its 2025 revenue forecast by 2%. Despite the headwinds, many analysts think BKNG can recover later this year as long as the broader economy remains bullish.
The online travel booking market is expected to grow to almost $1.13 trillion by 2030, and I think it's highly likely that BKNG will go through a stock split sometime this year. Broadening the shareholder base is a good first step to get out of the current correction.
AutoZone (NYSE:AZO) is mainly an auto parts and accessories retailer. AZO stock has been one of the most consistent and stable businesses in the past two decades due to the nature of the business. Car parts are always in demand and they also stay in demand during tough times as people can’t afford to buy a new car if the old one breaks down. Times are not as tough right now, but the car parts industry has solid tailwinds behind it.
The average age of vehicles in the U.S. was 12.6 years in 2024. This is up by two months from 2023. The average age of vehicles is expected to keep aging until 2028. Moreover, the automotive aftermarket market size is expected to reach $831.84 billion in 2029 at an 11.7% CAGR. AutoZone will likely capture a decent portion of this growth.
That said, recent financials haven’t been that stellar. Q1 FY25 sales increased by only 2.1% year-over-year to $4.28 billion and same-store sales growth was just 1.8%. Both EPS and sales missed estimates, but analysts think sales growth will accelerate and reach 6% next year, along with 13% EPS growth.
AZO stock is currently changing hands at $3,357. Analysts believe it could reach up to $3,900 by the end of the year. The last time this company split its stock was back in 1994, but doing one more after nearly 21 years seems like a good idea as AZO has become prohibitively expensive.