Why NVIDIA Stock Split is Possible? – Spaxton School

The Chances of a split in NVDA stock have risen significantly on account of accelerated revenue and price forecasts. Revenues are predicted to triple in the next quarter and sustain fairly high over the next few years. As a consequence, some analyst forecasts have breached $1000 and many are at more than $800. These are levels at which NVDA becomes a prime candidate for a stock split. Read our detailed analysis along with the latest analyst summary.

NVDA Stock Performance

• Last 5 Days: +6.2%
• Last 1 Month: +31.2%
• Last 6 Months: +66.7%
• Last 12 Months: +231.9%

The average NVIDIA Stock Forecast for the next 12 months is $854

Will NVIDIA Stock Split in 2024? Poll

• Feb 17th: +90.0%
• Feb 23rd: +92.0%

NVIDIA Q4 Earnings Update

Nvidia (NVDA) exceeded analysts’ fourth-quarter earnings forecasts, posting an adjusted EPS of $5.16 and revenue of $22.1 billion, against the anticipated EPS of $4.60 and revenue of $20.4 billion. This compares to an EPS of $0.88 on $6.1 billion in revenue for the same quarter the previous year. The company’s total revenue for 2022 reached $27 billion. Looking ahead, Nvidia projects first-quarter revenue to be around $24 billion, surpassing Wall Street’s expectation of $21.9 billion. This growth is attributed to the performance of Nvidia’s Data Center business, which reported $18.4 billion in revenue, driven by increasing demand for computing and AI across multiple industries.

Despite the positive earnings report, Nvidia experienced a significant reduction in data center revenue from China, due to US licensing restrictions that limit the sale of certain Nvidia chips to China. The company faces challenges from competitors like AMD and Intel in the AI chip market. Additionally, several of Nvidia’s major customers, including companies such as Amazon, Google, Meta, and Microsoft, are either developing or have developed their own AI chips, potentially affecting Nvidia’s market share. In response to these competitive pressures, Nvidia has initiated discussions with these companies about the possibility of designing custom chips, indicating a strategic approach to sustaining its market leadership amid increasing competition.

Managing Stock-Based Compensation: Nvidia grants a significant amount of stock-based compensation to its employees. A stock split would reduce the number of shares needed for each grant, making it more cost-effective for the company.

NVDA forecasts by analysts have been of very poor quality, check them out here

Nvidia Stock Split Date

There is no specific date for the next NVIDIA stock split. However, many analysts predict that the NVIDIA stock split could happen in 2024.

Will NVIDIA Stock Split? Arguments In favor of a split

1. Stock Price: Analysts expect NVIDIA stock to touch $1000 in the coming months. If the stock price becomes too high and potentially inaccessible for many investors, the management might consider a split to make the stock more attractive to retail investors. A price between $150 to $300 has historically been seen as comfortable for many big tech companies, indicating that if the stock surpasses this range significantly, a split becomes more probable.
2. Company Performance: NVIDIA’s recent performance, as reflected in its Q2 earnings summary, shows strong growth in revenues and earnings, suggesting that the company is on a solid footing. This might provide management with more confidence in considering a stock split.

Will NVIDIA Stock Split? Arguments against a Split

1. Historic Track record: NVIDIA has split its stock on five occasions since its listing on the Nasdaq. The most recent split was in 2021 when the stock was trading at around $800. Given that the company had not split its stock for nearly 14 years before the 2021 split, this suggests NVIDIA may not necessarily be in a hurry to split its stock frequently.

2. Industry Trends: NVIDIA split the stock in 2021 which is also when numerous companies announced stock splits. That is not the case now and it is unlikely NVIDIA will buck the trend.

3. Emerging Competition – Competitors like AMD and Intel are ramping up their AI capabilities to challenge Nvidia’s position. Even major tech companies such as Google, Microsoft, and Amazon are developing their own AI chips, potentially reducing their reliance on Nvidia in the future.

4. Emerging Geopolitical Risks: The United States has banned the export of numerous NVIDIA products to China and Russia. China is perhaps one of the world’s largest markets. Recently, The Biden administration included some Middle Eastern countries as well. These pose a risk to revenues and also increase the probability of competitors gaining on NVDA.

In sum, NVIDIA is likely to announce a split if economic conditions improve this year. Most other conditions are favorable for a split at the moment.

NVIDIA Stock Split Prediction

NVIDIA has had stock splits five times in the past and the last split took place in 2021. The NVIDIA stock back then was trading around $800. It must be remembered that the last NVIDIA stock split came after 14 years of its previous split. Currently NVIDIA stock is above $650 and from the point of investors, NVIDIA is expensive, and to have more investors holding NVIDIA stock, it needs to be cheaper, therefore a stock split or a market crash are the only options for NVIDIA stock to become cheaper.

What is Stock Split and Is it Good or Bad for the Market?

Stock splits are a way to make more shares of a company’s stock without changing the company’s overall value. Even though the total value of the company stays the same, the price of each share becomes lower after a split.

Companies might do stock splits to attract investors who don’t want to spend a lot on a single share. By making the price per share lower, more people might be interested in buying.

During a stock split, the company creates more shares and gives them to existing shareholders. This can make it easier to buy and sell the stock because there are more shares available.

However, doing too many stock splits might not be a good idea. While it can make the stock seem more affordable, if a company does a lot of splits, it could create confusion or make people wonder if something’s wrong with the company’s value.

Additionally, as we know stock splits often happen when a stock’s price has gone up a lot. This makes the stock seem pricey to some investors. So, the split makes the stock look cheaper, which attracts more investors who want to buy.

However, this can also catch the attention of people who bet that the stock’s price will drop, called short sellers. They might see the split as a chance to bet against the stock and make money if the price falls. Sometimes, this can cause the stock’s price to go down a bit after the split.

Therefore, the stock split could be both good and bad for the market.

When will there be an NVIDIA stock split next?

In theory, it is difficult to predict the next stock split. However, looking at past data, there are some scenarios under which a stock split by NVDA makes sense

• Stock Price > $300
• Solid Quarterly Results

NVIDIA Stock Split: Nvidia Stock Split History

Nvidia Corporation has a history of stock splits. Nvidia Corporation has announced stock splits on five different occasions in its trading history on Nasdaq. The stock split history is listed below for reference: –

RATIO
06/27/2000	2:1
09/17/2001	2:1
04/07/2006	2:1
09/11/2007	3:2
07/20/2021	4:1

NVIDIA Stock Split: Inference from past Splits

• A stock split is considered a good sign for the company. It has been observed that stocks get a short-term push just after the stock split. But that is not the case with Nvidia. At the time of the first split, the stock was trading around $185, and post-split it began trading at around $85 and it remained at the same level till the next split i.e. 17.9.2001. The stock did not reach this level again for the next 10 years.

• After a series of four stock splits in seven years between 2000-2007, NVIDIA announced the next stock split only in 2021. But Nvidia was not alone, Google, Apple, Amazon, Microsoft, and other big companies stayed silent for nearly two decades from 2000 to 2020. For example, Before the recently announced stock split, Amazon Inc last declared a stock split in 1999. Microsoft last announced a split in 2003. Similarly, Ford Motors last announced a split in 1994.

NVIDIA Stock Split: Last Stock Split in July 2021

• Nvidia announced a 4:1 stock split on May 26th, 2021 along with its first-quarter results. The stock price was trading around $800 and then it came back to around $200. The primary reason for announcing the stock split was to make it more accessible to small retail investors. Although various brokers do allow for fractional share purchases, a retail investor is more comfortable buying complete shares. Also, a price range between $150 to $300 is seen as comfortable (Looking at NVDA, Amazon, and Alphabet Stock Splits).

• NVDA’s share price closed at $186.12 on 20.7.2021, and in the last one-year stock has given a 93% return. The share price touched an all-time high of $333.76 on 19th November 2021. So in less than four months, the share price almost doubled, but the rally could not be sustained due to uncertainties in the global market and various other factors like inflation fears in the US and Russia-Ukraine war.

• The split in 2021 was different from other splits as this was on the backdrop of very strong quarter results. First-quarter revenue in 2021 was $5.66 billion, greater than the $5.3 billion expected and it rose 84% YoY. Earnings per share also surged 106% Gaming segment revenue increased 106% while data center revenue surged 79% YoY. So the company had shown solid performance in the last quarter and even in the year before announcing the split in 2021 and that is the main reason why the stock shot up more than 180% in less than four months post announcing the split.

• Share price at the time of all splits barring the most recent one was in the range of $50-100 and post-split it hovered around $30-50. The same was not the case in 2021, thanks to an extraordinary run-up of the stock and the share price was around $780. It signals that the split in 2021 was meant to make it more accessible to investors while all the previous ones were carried out with some other intention, maybe to dilute the shares outstanding.

Note:  collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.