Special topic: Nvidia Q1 Financial report overall higher-than-expected official Stock split Plan
Financial Associated Press, May 24 (editor Xiaoxiang) on Thursday, under the background of the overall weakness of the US stock market, Nvidia's performance was the best, soaring throughout the day.Bisonmegaways9.Bisonmegaways.3%, and continue to hit an all-time high. Earlier, the company announced an excellent earnings report after Wednesday's trading-revenue, profit and Q2 guidance fully exceeded market expectations, and the company also announced its latest stock split plan of 1 / 10.
In this regard, many industry insiders said that even putting aside the eye-catching Q1 earnings figures, the stock split plan announced by Nvidia may benefit the future prospects of the US stock giant, which ranks third by market capitalization.
The plan is likely to attract more interest from retail investors and could pave the way for the company to be included in the Dow in the future.
While the split itself will not change the valuation of the stock, the lower price per share is likely to attract more retail investors. Compared with well-funded institutional investors, retail investors tend to have less trading volume because of their limited capital.
Marco Iachini, senior vice president of Vanda Research, said, "the split may be the biggest catalyst for Nvidia to continue to attract retail capital."
The benefits of split shares are obvious.
In fact, with its current status as a "wave rider" in the AI boom, Nvidia has become the most popular stock among retail investors in the past year.
Vanda said in a report released on Wednesday that the stock currently has the highest weighting in the average retail portfolio, at 9.3 per cent, followed by 9.2 per cent of Apple and 7.8 per cent of ETF--SPDR shares 500 ETF (SPY), the largest US stock. A year ago, by contrast, Nvidia accounted for only 4.2 per cent of the average retail portfolio.
However, because Nvidia's share price has risen too fast and too high for more than a year, interest in the stock by retail traders has actually slowed. The latest weekly data show that five-day rolling inflows of retail traders into Nvidia totaled $278.3 million, well below the peak of $576.8 million in March.
Ben Laidler, global market strategist at eToro, a digital brokerage, says that while many retail investors can buy stocks piecemeal, regardless of the price, not all retail investors have the opportunity. Laidler said this made Nvidia's high share price a "growing obstacle" for the stock. Nvidia closed Thursday at about $1040.
Dan Coatsworth, an investment analyst at AJ Bell, also pointed out that Nvidia's split, which took effect on June 7, "should attract retail investors, although the market capitalization of the company has not actually changed."
In fact, in a document answering "frequently asked questions" about stock split, Nvidia also said, "given the sharp rise in the company's share price in recent years, the purpose of the split is to make it easier for employees and investors to get shares."
Judging from past experience, companies that announce stock splits are more likely to outperform the market. According to an analysis by BofA global research in February, the shares of companies that announced split shares will rise by an average of 25.4% over the next 12 months, compared with an average increase of 11.9% for the s & p 500.
Of course, stock splitting alone is obviously not a "panacea." Shares of Amazon and Google's parent company Alphabet fell sharply in 2022 because of the overall impact of soaring interest rates on the stock market, even though both companies announced stock splits that year.
It is easier to be included in the Dow in the future.
In the case of Nvidia, the split now has another benefit: it is expected to make it easier to be included in the Dow, Wall Street's oldest blue-chip index.
The Dow Jones Industrial average, made up of 30 companies, is a price-weighted index. Nvidia's high share price has actually become a big obstacle to its inclusion: Nvidia's share price of more than $1000 will be twice that of the Dow's largest heavyweights.
At Thursday's close, Nvidia's share price would fall to about $104, a moderate price for the Dow: it currently ranks 21st among Dow constituent stocks-lower than Merck and higher than Disney.
After Amazon was spun off in 2022, there was similar speculation about including it in the Dow. Earlier this year, Amazon was officially included in the Dow-one of only three "tech giants" within the Dow.
Art Hogan, chief market strategist at B. Riley Wealth, said, "Nvidia definitely meets all the conditions for eventual Dow membership: a good reputation, a history of continued growth, investor interest and its industry representation in the broader market. A share price of about $100 will make it easier to calculate the original index when it is included. "
A spokesman for the S & P Dow, which compiles the Dow, said recently that the company would not comment or speculate on the increase or decrease of the index.
Referring to the way the Dow is compiled, she said, "it is usually only when the company has a good reputation, shows continued growth, and is concerned by many investors." She also mentioned that the index committee assesses the share price when considering including a company.