Nvidia underwent a 10-for-1 stock split, historical data suggests potential 15% downside

From Nasdaq: 2024-06-24 04:44:00

Nvidia recently underwent a 10-for-1 stock split after recording a 725% surge in the past 18 months. Despite the split, history suggests the stock is likely headed for a sharp decline, with past performance following splits showing downward trends.

Following the announcement of the stock split, Nvidia’s share price has risen 33%. However, historical data from Bank of America shows that companies typically see an average increase of only 18.3% in share price over the 12 months following a stock split announcement. This implies a potential 15% downside for Nvidia over the next 11 months.

Nvidia has a track record of poor performance after stock splits, with the last five splits resulting in declines in share price over the six-month, one-year, and two-year periods following the split. On average, Nvidia shares have decreased by 23% in the first year after a split, and were still down by 3% after two years.

Despite the historical trends, Wall Street analysts remain bullish on Nvidia’s long-term prospects in artificial intelligence. The company holds significant market share in data center GPUs and AI chips, supported by superior hardware and software. Analysts believe Nvidia’s full-stack accelerated computing platform provides a competitive advantage that is difficult for rivals to match.

Financially, Nvidia has reported impressive growth in revenue and non-GAAP net income over the past few quarters, with expectations for 32% annual growth in earnings per share over the next three to five years. While the stock’s current valuation may seem high, growth-focused investors may still find value in holding Nvidia shares, despite the risks associated with stock splits.

While Nvidia has a history of declining following stock splits, growth-focused investors may find value in holding onto the stock, given the company’s strong financial performance and market position in artificial intelligence. Wall Street analysts are bullish on Nvidia’s long-term prospects, emphasizing the company’s competitive advantage in accelerated computing.



Read more at Nasdaq: Nvidia Executed a 10-for-1 Stock Split. Here’s What Happened the Last 5 Times the Artificial Intelligence (AI) Stock Split.