Key Points
- Stock splits boost accessibility but ignore core business health.
- Reverse splits signal distress yet allow turnarounds likeCitigroup‘s.
- Forward splits pair well with growth, while reverse splits expose risks.
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Stock splits often spark investor excitement, drawing attention to companies that appear more accessible with lower per-share prices. This buzz can drive short-term price gains as retail investors pile in, viewing the move as a sign of confidence from management.
However, a split does not alter the company’s underlying fundamentals, such as revenue growth, profitability, or market position — it simply increases the number of shares outstanding while proportionally reducing the price. Some firms, likeBerkshire Hathaway(NYSE:BRK-A)(NYSE:BRK-B), have never split their shares despite trading at enormous prices — above $748,000 per share for Class A stock and $500 for Class B — prioritizing long-term value over perceived affordability.
Still, forward splits like these are typically seen as bullish indicators, signaling strong performance and broader ownership appeal, which investors tend to reward.
On the flip side,reversestock splits aim to boost a low share price by consolidating shares, often to meet exchange listing requirements or attract institutional buyers. These are frequently associated with troubled companies facing delisting risks, but they are not always a death knell. Some have staged remarkable recoveries:Citigroup(NYSE:C) executed multiple reverse splits during the 2008 financial crisis yet rebounded to become a banking powerhouse;AIG(NYSE:AIG) underwent a 1-for-20 reverse split in 2009 amid its bailout but later returned to profitability; andBooking Holdings(NASDAQ:BKNG) (formerly Priceline) pulled off a 1-for-4 reverse in 2002 before evolving into a travel giant.
Below are two stocks that recently split their shares, but only one of them is a buy.
Palo Alto Networks (PANW)
Palo Alto Networks(NASDAQ:PANW), a leader in cybersecurity solutions, executed a 2-for-1 forward stock split in December 2024, making shares more attainable after a strong fiscal first-quarter performance. This move followed robust earnings, with revenue climbing 14% year over year to $2.14 billion for the quarter. The split halved the share price from around $400 to roughly $200, broadening access without diluting value.
What sets PANW apart as a buy is its dominant position in a sector exploding due to rising cyber threats. The global average cost of a data breach hit $4.88 million in 2024, according toIBM(NYSE:IBM), fueling demand for advanced protections.
Loading stock data...PANW’s platform strategy integrates firewalls, cloud security, and AI-driven threat detection into a unified system, resonating with enterprises seeking efficiency. In its fiscal fourth quarter ended July 31, revenue grew 16% to $2.5 billion, surpassing the $10 billion annual run-rate milestone. Remaining performance obligations, a key future revenue indicator, accelerated, underscoring deal momentum.
Analysts remain bullish, with 45 rating it a consensus “Buy” and an average 12-month target of $215 per share, right where it currently trades. Shares trade at 15 times trailing sales, a premium justified by 14% projected fiscal 2026 revenue growth to $10.5 billion and free cash flow margins targeting over 40% by fiscal 2028.
Acquisitions like the $25 billion CyberArk deal enhance its identity security offerings, positioning PANW to capture more of the $200 billion cybersecurity market. With AI integration and broad-based progress across segments, this split stock looks like a winner for October portfolios focused on tech resilience.
Lucid Group (LCID)
Electric vehicle (EV) makerLucid Group(NASDAQ:LCID) is backed by the Saudi sovereign wealth fund and implemented a 1-for-10 reverse stock split last month, consolidating shares to lift the price from penny-stock territory around $2.50 to about $18 per share. This maneuver addressed Nasdaq compliance risks but highlights deeper woes in a competitive EV landscape.
LCID struggles as a loser amid slowing demand and execution hurdles. Production guidance for 2025 was again cut to 18,000 to 20,000 vehicles from 20,000, reflecting supply chain strains and softening consumer interest after federal EV tax credits ended last month.
Lucid Group Inc
NASDAQ:LCID$21.67▼ $4.21(19.44%)1Y1D5D1M3M6M1Y5YMAXKEY DATA POINTS−
Previous Close$21.92Market Cap6.67BDay's Range$21.27 - $22.4252wk Range$15.25 - $36.40Volume6.01MP/E RatioN/AGross Margin-247.10%Dividend YieldN/AExchangeNASDAQThe company burns cash rapidly — over $3 billion annually — while posting consistent losses, with expected Q3 losses at $2.21 per share, despite a 21% year-over-year improvement.
The most recent big sales miss amplified these concerns. Lucid just announced Q3 deliveries of 4,078 vehicles, a record seventh straight quarterly increase but 18% below Wall Street estimates of around 5,000 units. This shortfall, driven by pricing pressures and competition fromTesla(NASDAQ:TSLA) andRivian(NASDAQ:RIVN), triggered a 9% stock plunge to near $22.CFRAdowngraded LCID to “Strong Sell” with a $10 target, implying over 55% downside, citing weak demand, high costs, and the historical underperformance of reverse-split firms.
The fourth quarter now demands over 8,000 units — a 137% jump from last year — to hit guidance, a tall order amid market saturation. LCID remains a high-risk stock to avoid for October, better suited to speculative traders at most than core holdings.