These 2 Tech Stocks Just Announced Big Share Splits. It’s a Good Time to Buy

Quick Read

• Netflix (NFLX) and ServiceNow (NOW) are getting timely splits, making them interesting as they beckon in the retail investors out there.

• Netflix had a bad quarter, and shares tanked. ServiceNow had a good one, but shares aren’t blasting off. Both names are worth looking at this year.

• Some investors get rich while others struggle because they never learned there are two completely different strategies to building wealth. Don’t make the same mistake, learn about both here.

Shares of Netflix (NASDAQ:NFLX) and ServiceNow (NYSE:NOW) were making big waves last week as it was announced that shares of both companies will, at long last, be splitting. Of course, stock splits are a good thing in that they make shares of a company, typically with a high share price (sometimes over four figures), far more accessible to retail investors who wouldn’t go down the route of buying “partial shares” in a company.

Undoubtedly, you really can’t blame new, smaller retail investors for forgoing the names with high share prices, even if one can technically afford to buy a single share or two. Personally, I think it’s a matter of convenience for the retail crowd, and such splits, I think, are a move that’s retail-friendly and could draw further inflows into a stock.

In any case, stock splits aren’t exactly a value creator, and if you’re looking to punch your ticket to shares at a good price, a split announcement might actually work against you, given the positive reaction that tends to follow despite no actual value being created by the act of a split! Personally, I find splits as perfectly fine, but I wouldn’t want to get caught chasing a split-related news event, especially when it comes to a stock that’s gaining for no reason other than news of a split.

Netflix and ServiceNow shares are getting big splits in just a matter of weeks! Retail investors, take notice!

Now, in prior pieces, I made a pretty bold call, predicting that Netflix and ServiceNow were top “stock-split stock” candidates to look at closely going into the end of the year. Their share prices were getting swollen, and their momentum suggested that both tech innovators were getting a tad out of reach of smaller investors. Either way, investors should get ready for a split as Netflix stock undergoes a 10-for-1 split while enterprise software and AI juggernaut ServiceNow takes a five-for-one split.

These splits will come into effect in just a few weeks’ time (end of November for Netflix stock and the start of December for ServiceNow stock), and could be worth watching closely as the splits come to be.

If there is no exaggerated positive reaction, I think both stocks could be strong buys on a post-split basis, not because of the lower price of admission, but because of their strong fundamentals and reasonable valuations. If you’ve only got enough cash for one name, even after their looming splits, though, which name is the better bet going into year’s end?

Netflix and ServiceNow shares are in a tough spot after revealing their latest earnings

Undoubtedly, Netflix stock seems more like a falling knife here after taking a hit following its disappointing quarterly earnings results. Now down nearly 18% from recent highs, the stock goes for a rather expensive 45.9 times trailing price-to-earnings (P/E). While expectations have come in a bit, with split news enthusiasm now likely faded away, I think the name looks interesting for those bullish on the streamer’s prospects going into the new year.

A strong content slate is notable, but challenging comparables are to be expected moving forward. As Jake Paul seeks a new rival to take on in the ring while a new season of Sesame Street lands on the platform, perhaps it’s time to think about initiating a position well before a split hits.

As for ServiceNow, shares are coming back after gaining on the back of a strong quarterly result, which I predicted less than a week ago, praising the AI beneficiary as a firm that “could surprise a lot of investors” going into earnings. Though the initial enthusiasm following earnings has since faded, I do think opportunistic investors might have a shot to get that last strong quarter “for free,” so to speak, given ServiceNow’s stock is actually right back to where it was before pulling the curtain on a decent number. Personally, I’d favor ServiceNow over Netflix as they end the year with a nice split!