Are Costco and Netflix About to Become Wall Street's Next Stock-Split Stocks?

Stock split euphoria has significantly contributed to market gains, leading some to consider high-priced companies like Costco and Netflix as prime candidates for forward splits. However, Costco's management indicates that widespread fractional share access reduces the necessity for a split, while Netflix's substantial institutional ownership (80.2%) mitigates the typical retail investor pressure that often drives such actions. This suggests that despite their high nominal share prices, company-specific factors related to market access and ownership structure are currently making a forward split unlikely for these prominent firms.

Analysis

Despite significant market enthusiasm for stock splits, which have historically preceded periods of outperformance—companies average a 25.4% return in the 12 months post-announcement versus the S&P 500's 11.9% according to Bank of America data—a near-term split for Costco (COST) or Netflix (NFLX) appears unlikely. While both companies exhibit high nominal share prices, nearing $1,000 and $1,300 respectively, specific internal factors are acting as deterrents. For Costco, CFO Gary Millerchip has explicitly stated there is "no plan at this time for a stock split," arguing that the widespread availability of fractional share purchasing for retail investors and employees diminishes the traditional economic necessity for such an action. In the case of Netflix, the primary obstacle is its ownership structure; with institutional investors holding 80.2% of outstanding shares, the retail investor base (19.8%) lacks the critical mass to pressure the board into a split, a dynamic also observed in other high-priced stocks with low retail ownership like AutoZone and Booking Holdings.

Key Decisions for Investors

• Investors should not factor a near-term stock split into the investment thesis for Costco or Netflix, as management commentary and ownership data indicate a low probability of such an event.
• Focus should remain on the fundamental drivers of value, such as operating performance and competitive positioning, rather than anticipating a cosmetic, split-driven price catalyst.
• For those monitoring for a change in outlook, key signals would include a shift in Costco's management tone regarding shareholder accessibility or a significant increase in the retail investor ownership percentage for Netflix.
• Recognize that the historical outperformance of post-split stocks is correlated with the strong underlying business fundamentals that prompt the split, not the split itself, reinforcing the need for fundamental analysis.