Meet Wall Street's first high-profile stock-split stock of 2025

Analysis of Wall Street's first high-profile stock split in 2025: Costco Wholesale's leadership and market impact

 Key conclusions:

According to data analysis, Costco Wholesale (ticker symbol COST) is the first company on Wall Street to announce a stock split in 2025. Its split plan has been widely predicted by the market and is seen as an important event outside of the retail industry and tech giants. In addition, Meta Platforms (META) and Microsoft (MSFT) are also thought to be split in 2025, but the exact timing and details have not yet been clarified. Here's a closer look:

1. Costco: The focus of the first stock split in 2025

1.  Split context and motivation

   • Historic share price rise: Since its IPO in 1985, Costco's stock price has risen by 62,500%, and as of February 2025, the stock price has exceeded $800, a record high. The high share price became the main driver of the split, which was aimed at improving the accessibility of retail investors.
   • Membership Model and Competitive Advantage: Through bulk purchasing and membership fee-driven business model, Costco has maintained operational efficiency with low gross margin (about 11%) but high turnover, attracting more than 36% of non-institutional investors.
   • Covering up valuation controversy: The split could alleviate concerns about its high price-to-earnings ratio (around 46x, nearly double the S&P 500 average) and attract more long-term investors.

2.  Split plan details

   • Timeline: According to the data, the split plan was first explicitly mentioned in February 2025, but the company's management still said in the December 2024 earnings call that there is "no specific plan" and needs to be further discussed with the board of directors. Combined with market forecasts, the split could be announced and executed in the second quarter of 2025.
   • Split Ratio Speculation: The first two splits in history were 2:1 (1994, 2000), and this time a higher ratio (such as 3:1 or 4:1) may be adopted to bring the stock price down to the $200-$300 range, aligned with retail peers such as Walmart (WMT).

3.  Market Impact

   • Improved liquidity: Retail trading volume is expected to increase after the split, while attracting passive index funds to increase their holdings.
   • Confidence signal: The split is seen as management's optimistic expectation of future growth and could drive the stock price higher in the short term (similar to Nvidia's 28% increase after the 2024 split).

2. Other potential candidates for a split: Meta Platforms and Microsoft

1. Meta Platforms（META）

   • Necessity of split: As the only unsplit company among the "Big Seven", Meta's stock price will exceed $600 in early 2025, with a market capitalization of more than $1.3 trillion. Splits can reduce the price of individual shares and facilitate inclusion in the Dow Jones Index (subject to lower share price matching weighting rules).
   • Business drivers: Revenue growth driven by AI advertising algorithms and the Llama model, with Q1 2024 advertising revenue up 26% year-on-year to $35.6 billion, and analysts expecting EPS to grow 30% annually over the next five years.
   • Split window: The market predicts that it may be announced in the second half of 2025, but it will be interesting to see the board decision and stock price action.

2.  Microsoft (MSFT)

   • Historical Split Tradition: Nine spin-offs have been completed since its IPO in 1986, most recently in 2003. The current stock price is more than $400, and if it is split 3:1, it can be reduced to about $138, which is in line with the price band of technology stocks such as Amazon and Apple.
   • AI and cloud business growth: Azure AI services are making significant contributions, and the Copilot tool is driving enterprise subscription revenue, which may be a catalyst for the split in 2025.

3. Companies that have been split: Nvidia and Arista Networks

1.  Nvidia (NVDA)

   • Completed 10:1 split in June 2024: share price dropped from $1,200 to $120 to increase liquidity and match dividend increases ($0.04→0.10 per share). The inclusion of more retail investors after the split drove the market capitalization up further.

2. Arista Networks（ANET）

   • A 4:1 split was executed in December 2024: The stock price fell from about $1,700 to $425, benefiting from the demand for cloud computing and AI data centers, and the stock price has risen by 45% in 2024.

 Fourth, the market logic and risk of stock splitting

1.  The core logic of forward splitting

   • Lowering the barrier to entry: Attracting retail investors and employee stock ownership plans (e.g., Visa's ESPP).
   •  Liquidity Optimization: Increase trading volume and reduce bid-ask spreads.
   • Psychological effects: Splits are often interpreted as management confidence and drive short-term buying.

2.  Potential Risks

   • Fundamentals irrelevance: Splits do not change a company's valuation or profitability, and about 30% of companies have negative returns 12 months after the split (e.g., some technology stocks have fallen due to weaker-than-expected results).
   • Valuation bubble concerns: Splits of high-growth companies may mask the problem of high price-to-earnings ratios, and we need to be wary of the risk of market corrections.

 5. Summary: The strategic significance of the 2025 split

 The 2025 stock split wave reflects two major trends:

1. Market capitalization management of tech and consumer giants: Maintain stock prices in the "psychological comfort zone" through splits and expand the investor base.
2. AI-driven high-growth narrative: Splitting companies into AI hardware (NVIDIA), cloud computing (Microsoft, Arista) and digital transformation (Meta) is split into supporting strategies for its business expansion.

Investors need to look at the split rationally and focus on the fundamentals of the company (such as Costco's membership growth, Meta's advertising revenue, Microsoft's cloud business growth), rather than simply chasing the short-term trading opportunities brought by the split.