Qualcomm Stock Split: Is Qualcomm up for Stock Split After Amazon and Alphabet Inc?
| Qualcomm Stock Split: In this article, we will learn about Qualcomm Inc’s past splits, the factors in favor of the split, and whether a split makes it a more lucrative buy. |
Various multimillion-dollar companies went for a split in the last 12 months. While Amazon Inc announced the split in March 2022, which went into effect on June 6, 2022, the Alphabet Inc stock split became effective from mid-July 2022. The split ratio for both companies is 20:1, meaning the share price for each share is reduced by a factor of 20. Shopify Inc also went for a split in the ratio of 10:1, while the Tesla Inc board approved the split in the ratio of 3:1 on August 4th, 2022.
Qualcomm although not a multimillion-dollar company of the scale of Amazon and Alphabet Inc, but has been a dominant player in the semiconductor and software industry. It debuted on the Nasdaq index way back in the year 1991 and has delivered a whopping 26,916% return as of 15.08.2022. It has been a consistent performer in the market for the last couple of years and its share price has almost tripled from $51.92 to $151.29 in the last five years.
With this background, the most relevant question to be asked is that is Qualcomm management is up for a stock split to get on board the ongoing split wagon.
In this article, we will learn about Qualcomm Inc’s past splits, the factors in favor of the split, and whether a split makes it a more lucrative buy.
Qualcomm Stock Split: Past Splits for Qualcomm Inc
After debuting on the market in the year 1991 with a share price of just $0.56 (split adjusted basis), the price went on to touch $88.06 by 31st December 1999, due to the dot com bubble. Qualcomm has had four splits in the past in a decade from 1994 to 2004. The first split happened in the year 1994 and the last known split 17 years before in the year 2004. The split history is tabulated below for reference: –
| Split Date | Ratio | Change in Price |
| Aug 16, 2004 | 2:1 | 0.97% |
| Dec 31, 1999 | 4:1 | 8.88% |
| May 11, 1999 | 2:1 | 3.30% |
| Feb 24, 1994 | 2:1 | -1.74% |
Qualcomm Stock Split: Inferences from the Splits
The split was successful in terms of providing a short-term bullish push- Technically, the split does not change anything for the company. It just increases the number of shares and reduces the share price by the same factor. But it does buoy investors’ sentiments which in turn gives a bullish push to share price. The same trend is observed in the case of Qualcomm in the past. The split is successful in terms of positive closing after split adjustment on the following day. On three occasions out of four, Qualcomm’s share price moved higher after adjusting the price for the split. The most successful split for obvious reasons was on Dec 31, 1999, as the dot com bubble was at its peak. The basic purpose of a stock split is to
make shares more affordable for small retail investors and the reason Dec 1999 split was most successful is that it brought down the share price from $647 to $176 and as a result, investors who were willing to invest in Qualcomm share and join the company’s growth journey, but for one or other reason did hesitate in shelling out $647 for each share. Share split and the price of $176 did motivate them to invest as per their capacity. The peculiar effect of a split is visible here as the share price moved 8.88% higher the next day after adjusting the price for the split.
No clear trend in share price for initiating the stock split- Qualcomm had four splits in its history and all of the splits were made at different share prices. While the first split was done only for $42, the ones done in the year 1999 were at very high prices. The high formed on Dec 31, 1999, was not broken up till recently in June 2020. So, management has not set the benchmark price for initiating the split, and the decision has come as and when felt necessary. The most recent split came at $70 pre-split, adjusting for inflation, it comes to around $105 for the current year. The share price is well above that mark.
Qualcomm Stock Split: Factors for Upcoming Stock Split
Qualcomm had a fair share of splits in the past. The late 1990s and early 2000s were the times of splits and now 2021-2022 is the season heated up for the split. There are a couple of factors in the favour of a split for the management of Qualcomm which are listed below: –
Split is a means to be in the eyes of investors: – Qualcomm has been a multi-bagger return company for the investors. It has given a 191% return in the last five years. But 2022 has not been the year for the share. Since the start of 2022, the stock has given an -18.75% return. The fiscal quarter results have been good and are beating the market estimates, but the stock has not been reflecting the same enthusiasm. At such difficult times, sometimes one trigger works in favor of the company and can turn things around. A split nowadays does get a lot of media attention and it can turn the sentiments for the company and the stock.
A means to enter the Dow Jones Industrial Average Index- It is a very prominent event for a company to make an entry in the world one of the oldest indexes- the Dow Jones Industrial Average. But the stocks with high share prices are discouraged from the index as Dow Jones takes the weighted average of stock to decide its weightage in the index. A price above $150 is not favorable for the index entry and thus if Qualcomm management has index entry on their mind, the time is ripe for a 2:1 stock split.
No split in the last 17 years- Maybe, the biggest motive for Qualcomm Inc is that they have not done a stock split in the last 17 years. Its peer, Amazon Inc executed the split 23 years back in 1999, before announcing the split in 2022 March. It got a positive bullish push and so Qualcomm can and must take clues from Amazon Inc.
Conclusion: A investor should buy QCOM Stock Now or Should Wait for the Split?
Frankly speaking, nobody on earth knows, when will the anticipated share split happen, but the good news for the investors is that there are other various positive factors to buying the stock and not wait for the split. Qualcomm is a fundamentally strong stock with $16 billion debt, that can be set off from$11 billion of cash and cash equivalent in the balance sheet. Moreover, the company is generating $13 billion of net profit per year.
The stock is down by about 20% since the start of 2022 and that itself makes a lucrative buy case for fundamentally strong. A long-term investor should add the stock in a number of tranches and can start from today itself.
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-Vineet Agarwal
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