KUALA LUMPUR, Nov 5 (Bernama) -- Bursa Malaysia closed higher, buoyed by Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, alongside positive cues from Wall Street. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 19.30 points, or 1.19 per cent, to 1,635.86 from Wednesday’s close of 1,616.56. The benchmark index opened 6.72 points higher at 1,623.28, and fluctuated between an intraday high of 1,642.44 and a low of 1,622.62 during the trading session. However, market breadth was negative, with losers outnumbering gainers 723 to 497, while 466 counters were unchanged, 1,075 untraded and 10 suspended. Turnover rose to 3.74 billion units valued at RM3.61 billion compared with yesterday’s 2.81 billion units valued at RM2.57 billion.
Netflix (NFLX) has joined the elite club of stocks trading at sky-high levels, hitting over $900 per share—a staggering fivefold increase since its 2022 lows. Now, speculation is growing: could a stock split be on the horizon?
Why a Split Makes Sense
Stock splits have been trending in 2024. Companies like Nvidia, Deckers, and Chipotle executed splits to make their shares more accessible to retail investors. Nvidia split 10-for-1 when shares were trading around $1,200, and Deckers and Chipotle followed suit with similar price-driven decisions.
Netflix’s current price tag puts it in the same league, making it a prime candidate for a split. According to Ken Mahoney of Mahoney Asset Management, “Once stocks hit the high hundreds or cross $1,000, a split seems almost inevitable.”
A split doesn’t change a company’s overall valuation but reduces the price per share, making it more affordable for small investors and potentially boosting demand. Historically, stocks that split outperform the market, with Bank of America strategists noting an average 25% gain in the year following a split announcement, compared to 12% for the broader S&P 500.
Netflix’s Strong Performance
Netflix’s remarkable growth is fueling its soaring share price:
- The company continues to add users, especially in international markets where streaming is still gaining traction.
- While its average revenue per user (ARPU) has remained steady, analysts expect Netflix to drive ARPU higher through international price hikes and advertising revenue from select plans.
- Efficient spending has boosted profit margins, doubling earnings per share over recent years.
These factors have increased market confidence in Netflix’s long-term growth story, pushing its stock to trade at nearly 40 times expected earnings—a premium well above the S&P 500’s 22.5 times multiple.
The Risks Ahead
Despite the benefits of a split, Netflix’s valuation is lofty. If earnings fail to meet expectations, the stock’s high multiple could trigger selling. Furthermore, as the international streaming market matures, Netflix’s growth could slow, echoing its experience in the U.S.
Takeaway
A split could make Netflix stock more accessible and potentially spur further gains. However, whether Netflix moves forward with one remains to be seen. What’s clear is that investors are bullish on Netflix’s ability to sustain growth, even as the company faces the challenge of meeting high expectations in a maturing market.
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