This year has been a year of monster stock splits, with some of the market's biggest companies -- such as Nvidia and Walmart -- launching such operations. And one major company -- Chipotle Mexican Grill -- even completed one of the New York Stock Exchange's biggest ever, a 50-for-1 split. Why do companies decide on such a move? Stock splits offer companies a way of lowering their per-share price without altering the market value or anything fundamental. This makes it easier for a broader range of investors to buy the stock.
These operations don't act as a catalyst for stock performance -- so don't expect a stock to soar the day after a stock split. But they are seen as positive moves because more investors over time may choose to buy the stock at a more accessible price. On top of this, a stock split generally shows a company is confident about the future, with the idea that the stock could advance once again from its new lower price.
And this is why investors always are on the lookout for the next stock split announcement. Which companies may be next? The following two healthcare players look ready to split after their stocks surged to levels past $900 and even $1,000. Let's find out more.
Eli Lilly (NYSE: LLY) completed four stock splits in the past, but they haven't been recent -- the last one was back in 1997. These days, Lilly's stock looks ripe for a stock split because it's trading for nearly $900, down slightly from its record high of about $960, reached a few weeks ago. Not only does this level make it harder for some investors to buy the stock, but often levels of around $1,000 represent a psychological barrier for investors -- they may view the stock as too expensive even if valuation is reasonable.
Lilly's run-up has been rather recent. The stock traded for $250 as recently as two years ago. So, what prompted investors to pile into this pharma giant all of a sudden? Lilly has become a leader in a particularly high-growth market -- the weight loss drug market. The company sells the molecule tirzepatide, commercialized as Mounjaro for type 2 diabetes and Zepbound for weight loss. Doctors have prescribed either for weight loss, though, and together these two drugs brought in more than $4 billion in revenue in the most recent quarter.
Bright days may be ahead for these revenue-driving drugs too. The weight loss drug market may multiply by 16 to reach $100 billion by the end of the decade, according to Goldman Sachs Research.
All of this means if Lilly splits its stock, making it easier for more investors to get in on the investment opportunity, there could be plenty of fuel to power more gains down the road.