Adam Levy, The Motley Fool

Sat, Jun 7, 2025, 1:20 AM5 min read

• Stocks tend to get a boost when management announces a stock split.

• This stock has produced excellent operating results, and a split could signal confidence from management.

• Advances in artificial intelligence could unlock a lot of value for the business over the next few years.

• 10 stocks we like better than Meta Platforms ›

Some might argue a stock split is merely cosmetic. Existing owners still own the same percentage of the company they did before the split and the business continues to operate just as it had before. The only difference is new buyers can now buy even smaller portions of the business, and shareholders can sell off smaller portions.

But a stock split, which usually comes after a prolonged period of gains in the stock price, can provide a useful signal from management. If management expects the price to continue climbing higher, it's more likely to split the stock. If it thought the stock was overvalued, it might hold off. As a result, stock prices seem to move higher when management announces a stock split.

In that case, it's best to buy a stock ahead of management's decision. And one stock, up 725% in the last decade, is a great buy at its current price whether management decides to split its shares or not.

There are a few factors that go into the decision to split shares. For one, the stock probably has a relatively high price, making it difficult for retail investors to buy whole shares. But there are other factors at play as well, including how the company uses share-based compensation and how much of the business is owned by smaller investors. When all of them align, a stock split makes a lot of sense.

That's why Meta Platforms (NASDAQ: META) looks poised to split its shares in the near future. Not only does the stock trade well above $650 per share, it pays out over $16 billion in share-based compensation per year and 20% of the shares outstanding are held by retail investors.

Meta has been one of the most successful businesses over the last 10 years. After several major acquisitions -- Instagram, WhatsApp, Oculus -- the company has grown its user base across all of its apps while pushing the frontier of virtual reality and augmented reality. Its recent focus on artificial intelligence (AI) promises to unlock value across its properties, including WhatsApp and Reality Labs (its AR/VR business segment).

Thanks to strong execution, management has grown its annual advertising revenue from $11.5 billion in 2014 to $161 billion in 2024. That's an average compound annual growth rate of 30%.