While it is undeniable that artificial intelligence (AI) played an important role in sending the message Dow Jones Industrial Average, S&P500And Nasdaq Composite at respective all-time highs, it is imperative not to overlook the role that stock split euphoria has played in the rise of key components of these indexes.

A stock split is a tool available to publicly traded companies that allows them to cosmetically adjust their stock price and number of shares outstanding by the same magnitude. These changes are superficial in the sense that they have no impact on a company’s market capitalization or operating performance.

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From Walmart launched the stock split euphoria at the end of February, more than a dozen brand-name companies/market leaders followed in its footsteps and carried out their own stock splits — all but one of which were of the advanced variety. A forward stock split is designed to make stocks more affordable to ordinary investors, and it is almost always done by companies that have a rich history of outperformance and innovation relative to their peers.

Since split stocks have a history of outperforming the benchmark S&P 500, investors are constantly looking for the next sensational company to announce a split. While nothing is set in stone, the following three unstoppable stocks with competitive moats are perfectly positioned to become Wall Street’s next split stocks in 2025.

Metaplatforms

The first industry giant that looks set to split its shares in the new year is in the lead social media company Metaplatforms (META 0.79%). Meta is the only member of the “Magnificent Seven” who has never had a split (it was made public in 2012). But with the company’s shares briefly topping $600 in October, the the ingredients are on the table for the Meta board to act.

Meta’s outperformance is a function of several factors. First, it attracts more daily active people than any other social media platform. In the quarter ended September, Facebook, Instagram, WhatsApp, Facebook Messenger, Threads and the company’s other apps collectively attracted an average of 3.29 billion active users. per day! Advertisers are well aware that Meta offers the best opportunity for their message(s) to reach as many users as possible. Thus, Meta can generally have exceptional advertising pricing power.

To build on this, advertising-focused operating models — Meta generates nearly 98% of its revenue from advertising — benefit from non-linear economic cycles. Although recessions are a normal and inevitable part of the economic cycle, they are short-lived. Nine of the 12 recessions since the end of World War II have resolved in less than a year. In comparison, most economic expansions last for several years, which tends to encourage businesses to spend more on marketing over time.

Meta’s cash-rich balance sheet and abundant operating cash flow are also essential to its success. The company closed September with $70.9 billion in cash, cash equivalents and marketable securities, and generated $63.3 billion in net cash from operations during the first nine months of 2024. This abundant cash flow allows CEO Mark Zuckerburg to take risks than other social companies. media companies can’t afford it.

For example, Zuckerberg is aggressively developing Meta’s AI-accelerated data center, while positioning his company to be an on-ramp to the Metaverse.

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Netflix

A second unstoppable stock with a competitive moat that appears ripe for a futures stock split is colossus of streaming Netflix (NFLX 1.44%). Since its IPO in May 2002, Netflix has undergone two splits: 2-for-1 in February 2004 and 7-for-1 in July 2015. But by the close of November 19, the company’s shares were tipping the scales. scales at $871. This figure is around the price at which Netflix shares were trading before their split in July 2015.

One of the reasons Netflix has been such a phenomenal investment for so long is its first-mover advantages in streaming. While traditional media companies like Paramount Worldwide And Walt Disney have been forced to play catch-up due to cord cutting, Netflix has been generating recurring profits for years. The last closed the month of September with 282.7 million paid streaming subscriptions worldwide.

Similar to Meta, Netflix enjoys substantial pricing power. Being a leader in original content, while offering one of the largest content libraries among digital media companies, allows it to charge more for subscriptions. This pricing power, combined with the company’s efforts to combat password sharing, has significantly improved its operating margin.

Additionally, because Netflix is ​​primarily a subscription-based operating model and does not rely on advertising like traditional media companies, it is better positioned to weather short-term downturns in the U.S. economy. This means that subscribers are much less likely to cancel their subscriptions during a brief period of economic turbulence than businesses are to dramatically cut their marketing budgets.

Finally, Netflix’s free cash flow has improved significantly since the start of this decade. As the company (finally) generates a lot of cash flow, it can rewarding investors with a steady stream of share buybacks and continually invest in original content that differentiates it from other media companies.

Costco wholesale

The unstoppable third title with an obvious competitive moat that looks ripe to become Wall Street’s next split stock in 2025 is a warehouse club Costco wholesale (COST -0.22%). Costco has completed three futures splits since becoming a public company, but the last one occurred in January 2000. With the company’s shares topping $930 on Nov. 19, it’s only a matter of time before its board of directors carried out a split to make its shares more theoretically affordable to ordinary investors.

One of the factors that makes Costco such a great company is its size.. She relies on her deep pockets to buy products in bulk. Buying merchandise in large quantities reduces the unit cost of each item, allowing Costco to undercut mom-and-pop stores, and even national grocery chains, on prices. With few exceptions, Costco offers a value proposition that appeals to cost-conscious consumers.

It also doesn’t hurt that Costco is a stock of consumer staples. It provides goods, such as food and beverages, that attract consumers to its stores regardless of the economic climate. Getting people through its doors is a challenge that Costco has effectively eliminated.

However, The main advantage of Costco is its membership model. The $65 to $130 annual membership that Costco charges to individuals and businesses represents a significant portion of its profits. This also serves as a margin buffer that further allows Costco to undercut local stores and national grocery chains.

The final thing to note about Costco’s member-driven operating model is that it encourages customers to stay loyal to its ecosystem. Members who pay $65 or $130 for the right to shop at Costco will likely make it their destination for major purchases – that is, they’ll want to get the most out of their dues.