It’s been another year of high-profile stock splits. Nvidia, Walmart, and Broadcom are just three of the companies that took the plunge and split their shares so far in 2024.
It makes you wonder: What high-flying stock could be next? I think it could be one of the hottest names on Wall Street — a company that is riding a massive wave of demand for its artificial intelligence (AI)-powered cybersecurity tools: CrowdStrike Holdings (CRWD 0.65%).
Image source: Getty Images.
The basics of CrowdStrike Holdings’ business
CrowdStrike Holdings, a company that may not be a household name yet, is rapidly gaining significance in the digital age due to the escalating threat of cybercrime.
Over the last few years, high-profile cyberattacks wreaked havoc on critical networks. In 2021, a ransomware attack on the Colonial Pipeline led to supply shortages for gasoline, diesel fuel, and jet fuel up and down the East Coast of the U.S.
In February 2024, a ransomware attack on Change Healthcare, a unit of UnitedHealth, shuttered the company’s data clearinghouse, causing massive disruptions for healthcare providers, pharmacies, and patients.
CrowdStrike, which develops and operates cloud-based cybersecurity modules, is stepping up its efforts to keep digital assets safe. The company offers various subscription-based security modules designed to monitor and protect organizations’ data, endpoints, and networks. These tools have been highly effective in detecting and preventing cyberattacks, which is a key reason for CrowdStrike’s rapid growth and increasing market share.
Could CrowdStrike’s excellent stock performance lead to a stock split?
CrowdStrike’s stock soared over the past few years, with a remarkable 264% increase in the last 18 months, fueled by surging revenue and free cash flow. In dollar terms, CrowdStrike’s stock rose from under $100 a share to nearly $400.
CRWD data by YCharts
With such a high cost for a single share, investors may wonder whether CrowdStrike may split its stock in an effort to attract greater interest from retail investors. To answer whether that’s likely, let’s look at the company’s history.
CrowdStrike went public in 2019, and the company never completed a stock split. However, many other companies have performed stock splits when their shares approach $400 or $500. That’s because, at that level, retail investor interest can begin to taper off. In addition, it can become more difficult to fine-tune stock-based compensation once stock prices rise above $400 a share.
In short, there are multiple reasons why CrowdStrike may wish to split its shares now. However, with no prior history of a stock split, it is difficult to determine whether the company’s management and board of directors would be inclined to do so.
Is CrowdStrike stock a buy now?
In any event, CrowdStrike remains a company that investors should consider owning. It is a major player in a rapidly growing field (AI-powered cybersecurity). It is also well run, with a co-founder CEO, George Kurtz, who has been with the company for more than a decade.
For long-term investors, CrowdStrike is a name to watch, regardless of whether the company announces a stock split or not.
Jake Lerch has positions in CrowdStrike and Nvidia. The Motley Fool has positions in and recommends CrowdStrike, Nvidia, and Walmart. The Motley Fool recommends Broadcom and UnitedHealth Group. The Motley Fool has a disclosure policy.