Regeneron Pharmaceuticals (REGN -1.00%) stock is trading above the $1,000 mark. It’s at a high enough threshold that the company could decide to split its stock. That would lower the share price, making it more accessible to investors who can’t buy fractional shares, or who simply don’t want to do so. It would also give the stock some great, positive free press, which could potentially lead to even more of a rally.
Should investors expect Regeneron’s stock to split in the near future? Here’s a look at whether it may happen, and what it would mean for investors if Regeneron does enact a stock split.
It has never done a stock split in its history
Since Regeneron went public in 1991, the healthcare stock has never split its shares. It would be a great milestone for the company, not because it would mean the business is somehow better, but because it would underscore the growth it has achieved over the years. For a stock to rise as highly in value as Regeneron has, the company would have to be generating some strong results.
The business has indeed posted some impressive growth. Back in 2013, its revenue totaled $2.1 billion, and that has soared to $13.1 billion this past year. The company has built up a strong, diverse business as it generates revenue from multiple collaborations and its eye medication Eylea has been generating billions in sales over the years. And the Food and Drug Administration approved a higher-dose version of Eylea last year, which should unlock a significant growth catalyst for the business, paving the way for even more growth.
In just the past five years, Regeneron’s stock has rallied more than 250%. It hasn’t been uncommon for the stock to trade north of a few hundred dollars, but only recently has it been trading above $1,000.
Would a stock split help Regeneron investors?
While a stock split could signify a great milestone for the company, it doesn’t normally mean anything for investors. Their investment remains the same and it’s just the share count and share price that changes. But despite this, recent history suggests that a stock split could sometimes help trigger a rally.
It’s a bit of a mixed bag when it comes to a stock split. Although it shouldn’t necessarily move the price upward since it doesn’t improve the growth prospects for the business or add any value for investors, simply getting the stock some positive press and getting retail investors excited about a stock split has the potential to be a positive catalyst for the company’s overall valuation.
Should you invest in Regeneron stock today?
Regeneron has a robust business that has allowed it to get to the position where it is today, where a stock split could be a justifiable move. But ultimately, it depends on management and whether it thinks the move makes sense. I think that odds are, it’ll probably happen as Regeneron could enact a 20-for-1 split and still be at a price north of $50.
However, given how high valuations have risen in the past year in the stock market and there being concerns of a possible slowdown in the economy on the way, it may not be too surprising for management to hold off on making such a move as splitting a stock and then seeing the value potentially fall during a downturn could lead to it trading at a lower price than management may have liked. Price doesn’t matter, but optics can sometimes play a role in decisions, both for management and investors.
The good news is that if you’re a long-term investor, you don’t have to care or worry about this either way. Regeneron has a solid business with strong financials, and with a bright future ahead it can make for a solid growth stock to add to your portfolio today. If a stock split happens, it won’t change any of that.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.