Day: September 17, 2024

Since the advent of the internet roughly three decades ago, investors have consistently had a next-big-thing innovation or game-changing technology to captivate their attention. However, 2024 has been somewhat unique in that two trends are vying for recognition at the same time.

While there’s no denying that the rise of artificial intelligence (AI) has helped lift all three major stock indexes to record-closing highs, the excitement surrounding stock splits has played an equally important role in sending the valuations of select prominent businesses higher in 2024.

Think of stock splits as a tool on the proverbial utility belt of publicly traded companies that they can use to adjust their share price. Just keep in mind that this tool is purely cosmetic. Altering a company’s share price and outstanding share count by the same factor has no impact on its market cap or operating performance.

While there are two types of stock splits — forward and reverse — investors overwhelmingly favor forward-stock splits. Forward splits, which are designed to lower a company’s share price to make it more nominally affordable for retail investors without access to fractional-share purchases through their broker, are usually conducted by businesses out-executing their peers.

Since 2024 began, a little over a dozen top-tier companies with sustained competitive advantages have announced or completed a stock split — all but one of which is of the forward-split variety.

Following the close of trading today, the next phenomenal business will step forward and take its place among the “Class of 2024” stock-split stocks, and in the process knock retail juggernaut Walmart (NYSE: WMT) out of the spotlight.

Walmart kicked off stock-split euphoria in late January

Despite tech stocks galore ascending to the heavens on the heels of the AI revolution, it was Walmart that opened the floodgates to major stock-split announcements this year.

In late January, Walmart’s board approved a 3-for-1 forward split — the largest in the company’s history and its 12th split since going public in October 1970 — to make shares more affordable for the company’s employees. Per CEO Doug McMillon, “Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates.”

When this split was completed after the close of trading on Feb. 23, Walmart’s share price fell from $175.56 to $58.52, while its outstanding share count increased by a factor of three.

Story continues

Chief among Walmart’s competitive advantages is its size. Having deep pockets and the ability to buy products in bulk, thereby lowering its per-unit cost for each item, has allowed it to consistently undercut local stores and even regional/national grocery chains on price. Walmart understands the importance of its value proposition with consumers and has consistently won on this front for decades.

Walmart is also enjoying tangible benefits from its e-commerce push. The convenience of prepared pickups and deliveries has hit home with busy consumers, leading to e-commerce sales growth of 22% in the U.S. in the fiscal second quarter (ended July 26, 2024), and 18% in international markets.

But Walmart is yesterday’s news on the stock-split front. A dominant retailer that’s embraced e-commerce, and has seen its shares skyrocket more than 12,000% since its initial public offering (IPO) in 1993, is ready to take center stage for the retail industry.

This skyrocketing retail specialist — up 12,600% since its IPO — is conducting its biggest stock split to date

In mid-July, leading footwear and apparel retailer Deckers Brands (NYSE: DECK) announced plans to conduct a 6-for-1 forward split. This marks only the second time since its IPO that it’s conducting a forward split, with the other being a 3-for-1 split in July 2010.

Former CEO Dave Powers, who retired last month but had led Deckers Brands for the previous eight years, had this to say about his company’s board approving the historic 6-for-1 split:

The effective date for this split is (drum roll) following the close of trading today, Monday, Sept. 16. When Deckers Brands’ stock opens for trading tomorrow, it’ll be at the split-adjusted price of closer to $156, instead of the $935.07 it closed at on Sept. 13.

As I alluded earlier, one of the longtime keys to Deckers’ success has been its e-commerce push. As of the most-recent quarter, ending June 30, the company reported $310.6 million in direct-to-consumer (DTC) sales, which is up nearly 22% from the prior-year period. More importantly, DTC sales accounted for close to 38% of total revenue, which compares to less than 32% of net sales in the same quarter three years ago.

This almost six-percentage-point improvement might not sound like much, but it’s increasingly made Deckers Brands an inventory-light businesses. Not having to tie up its cash in inventory and manufacturing has led to superior margins for the company.

The strength of the company’s brands has played a key role in its long-term success, as well. Though it owns around a half-dozen major brands, the best-known include Ugg, Hoka, and Teva. Hoka ($420.5 million in the latest quarter), Ugg ($195.5 million), and Teva ($48.4 million) account for the lions’ share of sales.

But the most-exciting aspect of Deckers’ strategy has been its international expansion. E-commerce is still just getting off the ground in international markets, which affords the company a sustained double-digit, high-margin growth opportunity.

The icing on the cake is that Deckers Brands is a debt-free company with north of $1.4 billion in cash and cash equivalents. It has the financial flexibility to make deals happen, just as it did when it purchased Ugg in 1995 and Hoka in 2012.

While this sizable stock split is long overdue, it can also be argued that Deckers Brands has some work to do to grow into its current valuation. Although the company’s stock is absolutely deserving of a premium given the momentum it’s enjoyed from DTC growth, its international push, and its top-tier branding, shares are trading at 26 times forward-year earnings. This might not seem like a steep price to pay, but consensus annualized earnings growth over the next five years is a more modest 11.4%.

In other words, Deckers Brands will likely need to blow the doors off of Wall Street’s and its own growth forecasts if its stock is to head even higher.

Should you invest $1,000 in Deckers Outdoor right now?

Before you buy stock in Deckers Outdoor, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Deckers Outdoor wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $729,857!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 9, 2024

Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.

Forget Walmart: The Biggest Retail Stock Split of the Year Has Arrived was originally published by The Motley Fool

A recent post on the Bogleheads Forum illuminated a common dilemma for those nearing retirement: deciding whether to retire early.

A 57-year-old user, currently single and living in a low-cost-of-living area with no debt and a paid-off home, is contemplating retirement. With a current net worth of approximately $1.3 million, the user is trying to determine the right time to retire.

Don’t Miss:

Financial Overview

The user’s financial situation includes:

• $750K in a 457(b) plan

• $275K in a Roth IRA

• $275K in after-tax accounts

• $30K in savings

All investments, except savings, are allocated in a 60/40 portfolio. The user plans to rely on a pension of $65K annually starting at age 60, which includes a 3% cost-of-living adjustment after the first four years. Social Security benefits of $6K annually are expected to begin at age 70.

The current spending is around $60K per year, though the user only spends $40K and is looking to add some extra cash for more enjoyable activities.

Trending: Warren Buffett once said, “If you don’t find a way to make money while you sleep, you will work until you die.” These high-yield real estate notes that pay 7.5% – 9% make earning passive income easier than ever.

Key Concerns:

See Also: The number of ‘401(k)’ Millionaires is up 43% from last year — Here are three ways to join the club.

The Bogleheads forum responses offered various perspectives and reassurances:

Forum members assured the user that their financial situation is secure enough to support early retirement. The pension, despite its lack of inflation adjustment in the initial years, along with existing investments, should comfortably cover expenses.

Regarding boredom, suggestions ranged from finding fulfilling activities and hobbies to maintaining flexible plans. Volunteering and other hobbies like playing guitar were noted as great ways to stay engaged.

Story continues

Trending: This billion-dollar fund has invested in the next big real estate boom, here’s how you can join for $10.

Several users emphasized that retiring is deeply personal and not purely financial. They advised considering whether the current work is enjoyable or a source of stress. The consensus was that if financial concerns are minimal and personal fulfillment is prioritized, retiring now could be a wise choice.

Overall, the majority agreed that the user is financially prepared to retire and should focus on what will bring personal satisfaction.

Retiring is as much about personal readiness and happiness as it is about finances. As one forum member aptly noted, “The only thing you can’t buy is more time, so would you rather spend it working or doing whatever YOU want?”

Read Next:

UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets.

Get the latest stock analysis from Benzinga?

This article I’m A Single 57-Year-Old With No Debt, $1.3 Million In Savings, And $65,000 Pension – Can I Retire Early? originally appeared on Benzinga.com

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

(Bloomberg) — Intel Corp. Chief Executive Officer Pat Gelsinger has landed Amazon.com Inc.’s AWS as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker.

Most Read from Bloomberg

Intel and AWS will coinvest in a custom semiconductor for artificial intelligence computing – what’s known as a fabric chip – in a “multiyear, multibillion-dollar framework,” according to a statement Monday. The work will rely on Intel’s 18A process, an advanced chipmaking technology.

The shares jumped more than 8% in late trading after the announcement. They had been down 58% this year, closing at $20.91 on Monday.

“Today’s announcement is big,” Gelsinger said in an interview. “This is a very discerning customer who has very sophisticated design capabilities.”

The news was part of a flurry of announcements that followed a pivotal board meeting last week. Intel also is postponing new factories in Germany and Poland, but remains committed to its US expansion in Arizona, New Mexico, Oregon and Ohio.

Gelsinger, who embarked on a bold comeback effort for Intel in 2021, has had to scale back some of his ambitions in the name of efficiency. With sales shrinking and losses piling up, the company announced plans last month to slash 15,000 workers, find $10 billion in cost savings and suspend Intel’s dividend. Now he’s going further to rein in expansion plans, especially overseas.

The Poland and Germany construction projects will be paused for about two years depending on market demand. Another one in Malaysia will be completed but only put into operation when conditions support it, Intel said.

At last week’s three-day board meeting, executives presented options on how to conserve cash while keeping Gelsinger’s turnaround plan on track. The CEO’s effort hinges on transforming Intel into a so-called foundry, a chipmaker that manufacturers products for outside customers. The Santa Clara, California-based company has been slow to line up customers for the project — and a high-profile client such as Amazon represents a notable win.

Intel also is looking to speed up efforts to execute the $10 billion in cost savings and focus its products better on AI computing, an area where rival Nvidia Corp. has excelled. It’s also looking to pare its real estate globally by about two-thirds by the end of the year.

Story continues

And the company reiterated plans to sell part of its stake in Altera Corp. to private equity investors. The business, which Intel bought in 2015, was separated from its operations last year with the goal of taking it public.

Amazon Web Services is the largest provider of cloud computing, and it could help build confidence that Intel can compete with the likes of foundry leader Taiwan Semiconductor Manufacturing Co. AWS has used Intel processors over the years, but has been shifting more toward in-house designs — the very products that Intel may now help manufacture.

Microsoft Corp., another major cloud-computing provider, announced plans in February to use Intel for some of its in-house chips as well.

Another change: Intel’s foundry operations, referred to as IFS, will be further separated from the rest of the company and become a wholly owned subsidiary. That move is aimed in part at convincing prospective customers — some of whom compete with Intel — that they are dealing with an independent supplier. Bloomberg reported earlier on a potential foundry separation.

“We still have things to learn about becoming a foundry,” Gelsinger said in the interview. “I need lots of customers.”

In another win, Intel said earlier Monday that it’s eligible to receive as much as $3 billion in US government funding to manufacture chips for the military. The effort, called the Secure Enclave, aims to establish a steady supply of cutting-edge chips for defense and intelligence purposes. That news helped send the shares up 6.4% in regular trading Monday.

The Secure Enclave award is separate from a possible $8.5 billion Chips and Science Act grant that Intel is set to receive to support factories across four US states. The projects include a facility in New Albany, Ohio, that Intel has said could become the world’s largest chipmaking operation.

Intel still has a long way to go to win back Wall Street’s full confidence. After years of losing ground to rivals and seeing its technological edge slip, the Silicon Valley pioneer is valued at less than $90 billion. It no longer ranks as one of the top 10 chip companies on that basis. Nvidia, meanwhile, now has a market capitalization of about $2.9 trillion.

Intel shocked investors with a bleak financial report last month, triggering the biggest single-day stock decline in decades. Analysts described the announcement as Intel’s worst-ever earnings report.

Gelsinger, in a letter to employees, acknowledged that the chipmaker’s performance has drawn negative scrutiny — and spurred speculation over what might happen to the company. The only way to “quiet our critics” will be to deliver results and execute better, he said. Today’s announcements are a step toward that, he said.

“Is it good enough? No. Is it substantial? Yes,” he said in the interview. “I’ve reupped my commitment. We’re going to finish a seminal assignment.”

–With assistance from Mackenzie Hawkins.

(Updates with more from announcements starting in ninth paragraph.)

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.

• Donald Trump can sell his Trump Media stock soon, potentially scoring a huge payout.

• The lockup period for Trump Media shares ends September 25, or earlier if some conditions are met.

• Trump’s stake in Trump Media is worth about $2 billion, over half his total net worth.

Donald Trump is just days away from being eligible for a huge payout.

The potential source of the wealth is the Republican presidential nominee’s company Trump Media, which owns his platform, Truth Social. The entity first began trading on the Nasdaq in March under the ticker DJT.

As part of a “lockup agreement,” which is common practice in initial public offerings, Trump has been barred from selling his shares in the company for 180 days.

That countdown clock is now ticking down.

The lockup period, as explained in the company’s regulatory filings, is scheduled to end on September 25, but it could also end as early as September 20 if certain conditions are met.

To be freed up on the earlier date, the share price needs to remain above $12 for 20 trading days within the 30-day period that began on August 23. Despite the stock falling to around $16 this past week — its lowest point on record — that condition has been met. Shares have plummeted 60% since mid-July.

Trump owns almost 60% of the company, and with the company’s current valuation at around $3.3 billion, that means his stake totals about $2 billion.

His stake in the company makes up more than half of his total net worth, according to Forbes, which estimates Trump is worth about $3.7 billion.

It’s not clear if Trump intends to sell his stock or not, and in an SEC filing, Trump Media explains that if a large shareholder even indicates plans to sell, it could negatively affect the share prices.

“These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price” of the stock, the filing says.

There’s also the matter of Trump not wanting to cash in his holdings with DJT stock at record lows. In recent months the share price has been correlated with Trump’s polling numbers, so any sort of recovery in election odds could lead to a stock rebound — and a more attractive payout package.

And on Friday, Trump insisted he wouldn’t sell off.

“No, I’m not selling. No, I love it,” Trump said during a press conference in California. That sent shares briefly skyrocketing.

Still, Trump could probably use the money right now.

Earlier this year, Judge Arthur Engoron ordered Trump and executives at the Trump Organization to pay out $454 million plus interest in their New York civil fraud trial. So far, Trump has paid $175 million for an appeal bond, but if he loses his appeal, he’ll be on the hook for hundreds of millions more.

Story continues

On top of that, Trump had already burned through $100 million in lawyer’s fees by March this year, according to a report by The New York Times.

Trump Media has had a tumultuous ride since entering the public market. With help from meme stock mania, the company’s stock soared to $70 a share when it first went public, shooting Trump Media’s market cap to $9 billion and raising the Republican nominee’s net worth to $7 billion.

The company boasted an eye-watering valuation despite reporting paltry earnings and high expenditures.

But Trump Media’s stock has been in free-fall ever since. And although Trump insisted he won the debate against Kamala Harris, the market resoundingly reacted as if he lost, making it ultimately responsible for DJT’s last leg down to record lows.

Read the original article on Business Insider