Putting aside the historic bouts of volatility we've witnessed on Wall Street over the last two months, the previous two-plus years were dominated by optimists. Between early December 2024 and mid-February 2025, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all hit respective all-time highs.
Though the rise of artificial intelligence (AI) has been the primary catalyst fueling Wall Street's bull market rally -- AI is forecast to add $15.7 trillion to the global economy by 2030, per PwC -- excitement surrounding stock-split stocks also played a key role.
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Stock-split euphoria fueled Wall Street's gains in 2024
A stock split is an event that allows a publicly traded company to cosmetically alter its share price and outstanding share count by the same factor. The "cosmetic" aspect has to do with these adjustments not impacting a public company's market cap or its underlying operating performance.
Splits come in two flavors, with investors gravitating to one far more than the other. The less-popular of the two is a reverse split, which is designed to increase a company's share price. This type of split is often undertaken from a position of operating weakness and is geared at avoiding delisting from a major U.S. stock exchange.
In comparison, investors usually flock to businesses undertaking forward stock splits. A forward split aims to reduce a company's share price to make it more nominally affordable for everyday investors who may lack access to fractional-share purchasing through their broker. Businesses whose share price has soared to the point where a split is needed often have a rich track record of out-executing and out-innovating their competition.
Last year, more than a dozen high-profile companies completed forward splits, including the likes of AI juggernauts Nvidia and Broadcom, retail behemoth Walmart, and fast-casual restaurant chain Chipotle Mexican Grill.
Considering that companies conducting forward splits have a track record of outperforming the S&P 500 in the year following their announcement, investors are always on the lookout for Wall Street's next stock-split stock. After months of waiting, the first high-profile stock split announcement for 2025 has been made -- and it's probably not from the brand-name company you thought it would be.
Wall Street's most-logical stock-split candidates haven't taken the plunge
Attempting to decipher which high-flying stocks are likeliest to announce a forward split is a lot tougher than just screening for public companies with a nominally high share price. For instance, some boards have no desire to conduct a split (e.g., Berkshire Hathaway).
The other qualifier that needs to be taken into account is what percentage of outstanding shares are owned by institutional investors, relative to retail investors. The higher the level of institutional ownership, the less of a need to reduce a company's nominal stock price to make its shares more "affordable."
Even with these qualifiers in mind, investors (including myself) have been expecting one or more brand-name companies to become 2025's first major stock-split stock.
For instance, streaming service provider Netflix(NASDAQ: NFLX) has easily crested $1,000 per share following the release of its first-quarter operating results. Netflix has two prior forward splits under its belt, the last one of which came in the summer of 2015, with the company's stock hovering around $700 per share.
But what Netflix doesn't have is a particularly large percentage of everyday investors who own its stock. Shy of 20% of its outstanding shares are held by non-institutional investors, which isn't coercing Netflix to pull the trigger on a stock split.
Costco Wholesale(NASDAQ: COST) is another logical candidate for a forward split that hasn't made the move to do so. Shares of the wholesale club, whose growth is primarily driven by high-margin membership fees, have hovered around $1,000 per share.
Although Costco does have a healthy dose of everyday investor ownership (close to 36% of its shares are held by non-institutional investors), its management team noted in a recent conference call with analysts that the rise of fractional-share purchasing for employees and everyday investors has it reluctant to split its stock.
Social media colossus Meta Platforms(NASDAQ: META), which is the parent of Facebook, Instagram, WhatsApp, Threads, and Facebook Messenger, is yet another potential stock-split stock. In February, shares of Meta peaked around $740. As the only "Magnificent Seven" stock to never conduct a split, it appeared to be a logical candidate to do so.
Roughly 28% of Meta's share ownership falls into the retail investor category, which gives it a strong enough case for a split. But following two months of outsized volatility on Wall Street, demand for a forward split may no longer be as pressing as it was in February.
Image source: Getty Images.
Meet Wall Street's first high-profile stock-split stock of 2025
But amid the heightened volatility on Wall Street, one brand-name company, which is also an S&P 500 component, announced its first forward split in 20 years, and only its fourth split since going public in April 1993. Say hello to Wall Street's first major stock split of 2025: auto parts supplier O'Reilly Automotive(NASDAQ: ORLY).
On March 13, the company's board approved a record 15-for-1 forward split which, if approved, would go into effect after the close of trading on June 9. O'Reilly is putting this stock split amendment in front of its shareholders at the company's annual meeting on May 15, which will more than likely be approved.
The reasoning behind this split is similar to what Walmart's board echoed when kicking off stock-split euphoria last year. O'Reilly's CEO Brad Beckham suggested it'll be easier for employees to purchase whole shares, rather than fractions of shares, once the split takes place. O'Reilly's employee stock purchase plan allows its team members to buy stock via payroll deductions at a 15% discount.
With O'Reilly Automotive stock gaining in excess of 4,500% since its last stock split 20 years ago, the company has clearly been doing something right. Its outperformance is a reflection of macro factors working in its favor, as well as smart decision-making by its board and management team.
Arguably the biggest positive for auto parts suppliers is the aging of existing vehicles on U.S. roadways. According to S&P Global Mobility, which is a division of the better-known S&P Global, the average age of cars and light trucks in the U.S. rose to 12.6 years in 2024, which is up from 11.1 years in 2012. Though newer vehicles are made to last longer, the exorbitant cost of new cars and trucks is encouraging drivers to hang onto their existing vehicles for a longer period. That's fantastic news for businesses like O'Reilly, which supply parts to drivers and mechanics.
Another reason O'Reilly Automotive stock has been unstoppable is its well-known hub-and-spoke distribution network. This is a company with 31 regional distribution centers and close to 400 hub stores. Its hub-and-spoke distribution model ensures that more than 153,000 stock keeping units (SKUs) are available to its stores on a same-day or overnight basis.
O'Reilly Automotive also has one of the most-enviable share repurchase programs among publicly traded companies. Since its inception in January 2011, the company has bought back 96.5 million shares of common stock for an aggregate investment of $25.94 billion. On a percentage basis, we're talking about a reduction in the company's outstanding share count of 59.4%!
Public companies with steady or growing net income and a declining share count due to buybacks often enjoy a boost to their earnings per share (EPS). There's no question that reducing the company's share count by 59.4% in a little over 14 years has had a positive impact on EPS and made its stock more fundamentally attractive.
With demand for auto parts being relatively recession-resistant, there's a good chance O'Reilly Automotive stock is headed even higher over the long run.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sean Williams has positions in Meta Platforms. The Motley Fool has positions in and recommends Berkshire Hathaway, Chipotle Mexican Grill, Costco Wholesale, Meta Platforms, Netflix, Nvidia, S&P Global, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
