Investors love stock splits. Although they’re technically a non-event, a stock split is seen as a bullish indicator. They indicate management is confident in the company’s future growth prospects. Making the stock more affordable and liquid means shares will be available to more people.
Of course, stock splits are meaningless in terms of the company. Shareholders end up with 12 slices of pizza instead of six. They have two $5 bills in their wallet instead of a $10 bill. Rearranging the number of shares and their price tells you nothing about the business.
Still, since Nvidia (NASDAQ:NVDA) reignited the stock split market by splitting its shares 4-for-1 in July 2021, a number of other big-name companies also split their shares. Most are handily beating the S&P 500 since the date of the split. A few, like Tesla (NASDAQ:TSLA), are significantly underperforming the index.
Three stock-split stocks that divvied up their shares over the past year or so still have tremendous value to unlock for shareholders. If the stock market rebounds in the fourth quarter as some analysts suggest, these are companies you want to buy now.
Palo Alto Networks (PANW)
According to virtual private network (VPN) provider SurfShark, since 2021 the number of cybercrime victims increased 16-fold to 91 victims every hour. The cost of cybercrime increased an eye-bleeding 570 times, hitting $1.2 million per hour. Like death and taxes, hackers apparently will always be with us.
That gives Palo Alto Networks (NASDAQ:PANW) a target-rich environment to sell its products protecting data. It’s certainly finding an audience of willing customers. Fiscal year 2023 revenue soared 25% to $6.9 billion and it turned a $267 million net loss in 2022 into a $440 million profit this year.
Billings grew 23% to $9.2 billion as Palo Alto Networks develops new and innovative platforms to drive annual recurring revenue (ARR). Its Cortex platform is an artificial intelligence-driven service for threat detection and prevention. It achieved $1 billion in ARR in the fiscal third quarter. Its secure access service edge platform just achieved ARR of $1 billion in the fourth quarter. Growth in ARR indicates customers like what they’re getting and are coming back for more.
Palo Alto Networks split its stock 3-for-1 in Sept. 2022. Since then shares grew 43% compared to a 10% gain by the S&P 500. The stock is up 87% this year alone. With an unending need for its services, the sky is truly the limit for this cybersecurity leader.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) hasn’t quite run away with it in the same way since its 20-for-1 stock split in June 2022. Shares are only 9% higher since then versus a 6% gain for the broad market index. Still, the online retailer is among the stock split stocks worth buying.
Obviously, its internet retailing operations are top notch. It just completed its Prime Big Deal Days and it outpaced last year’s event. According to Amazon, Prime members bought over 150 million items from third-party sellers, a 50% increase from last year.
Yet the numbers also show consumers are feeling the pinch of persistent inflation. Data analytics firm Numerator says 60% of the items purchased were for less than $20 while just 4% were for more than $100.
But Amazon is integral to the economy. It accounts for nearly 40% of all online retail sales in the U.S. It does face some headwinds from federal regulators suing the retailer for various alleged trade practices, but it’s not enough of a concern to sink the company.
Investors should note the real growth opportunity is in its cloud-based business, Amazon Web Services. Long the profit center of Amazon, AWS represents 16% of total revenue, but 84% of total operating profits.
AWS is also the leading cloud services operation globally with a 30% share of the market, according to Canalys. AI could push that higher. With AWS more critical to Amazon’s operating cash flows, which rocketed 74% higher during the period, there’s plenty of growth still to come for the retail behemoth.
Copart (CPRT)
Auto auction operator Copart (NASDAQ:CPRT) is a different kind of used car dealer. Unlike many dealers that buy their vehicles from the public, some 83% of Copart’s sellers are insurance companies. Other sellers include banks, finance companies, charities, and fleet operators. And most of the vehicles it acquires are typically damaged and considered a total loss by the insurers.
You might not think that would be a viable business, but Copart’s is booming. Revenue jumped 10.5% in FY2023 to $3.9 billion with net profits rocketing 32% higher to $84 million.
This comes even though market conditions aren’t ideal for used cars. Prices remain stubbornly high. Although that can mean higher profits per vehicle, it also makes insurance companies reluctant to declare a vehicle a total loss. Fortunately, the peak of the market seems to have passed.
Kelley Blue Book says used car prices fell 1% in August, with the average reaching $26,251. That’s still historically high and KBB sees it remaining so for some time. Used car prices lag those of new cars. So even as new car prices have returned to last year’s levels, used car prices will take some time to fall.
That means Copart has some important tailwinds building behind it. It split its stock 2-for-1 in August. Shares are up 3% since then compared to a 5% drop by the S&P 500. With Wall Street looking for earnings to grow 22% a year for the next five years, this is an opportune time to buy into this used car auction house. That makes CPRT a definite contender when it comes to stock split stocks to buy now.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
