There have been several major stock splits so far in 2024. Chipotle Mexican Grill carried out a 50:1 split. NVIDIA had a share split of 10:1. Walmart divided its shares in a ratio of 3:1. And more have joined and others are on the way.

Some investors may be wary of buying stocks right now, whether or not a split has already occurred. Major indices have fallen sharply on concerns about a possible recession and the Bank of Japan’s interest rate hike.

However, I think the decline presents a great opportunity for forward-thinking investors. Here’s the hands-down best stock split stock to buy in August despite the market sell-off.

Two-factor authentication

I won’t keep you in suspense. My pick for the best split stock to buy this month is… Broadcom (NASDAQ:AVGO). Why Broadcom? I think two factors stand out in particular. But they have nothing to do with the semiconductor maker’s 10-for-1 stock split in July.

The first factor that drew me to Broadcom is its growth prospects. Broadcom’s revenue grew 43% year-over-year in the second quarter of 2024, driven by demand for its artificial intelligence (AI) solutions and the company’s acquisition of VMware. I expect AI and VMware to remain key growth drivers going forward.

No one knows how to network AI accelerators better than Broadcom. Not surprisingly, seven of the world’s eight largest AI superclusters rely on the company’s networking technology. Broadcom expects revenue growth in AI networking to accelerate.

Since acquiring VMware, Broadcom has signed up about 3,000 of its 10,000 largest customers to build a self-service virtual private cloud on-premises. Most of these contracts are multi-year, so the revenue will continue to flow for a long time. Broadcom will no doubt focus on signing up more of these large customers to VMware as well.

The second factor that is crucial for me with Broadcom is the valuation. Broadcom shares trade at 23.9 times forward earnings. This multiple is relatively low for a top-tier AI stock. The stock’s valuation looks even more attractive when growth forecasts are included. The price-earnings-growth (PEG) ratio with five-year growth forecasts is only 1.06, according to LSEG.

Wall Street is also optimistic about Broadcom’s prospects

I’m not alone in my optimism about Broadcom. Wall Street is also optimistic about the stock.

Of the 29 analysts covering Broadcom surveyed by LSEG in August, 10 rate the stock as a “strong buy.” Another 17 analysts recommend it as a “buy.” The remaining two analysts rate Broadcom as a “hold.”

The story goes on

The average 12-month price target for Broadcom is more than 36% above the current share price, with the most pessimistic analyst surveyed by LSEG believing the stock can rise 9%.

Sure, many Wall Street analysts are also bullish on Nvidia, Chipotle and Walmart. However, analysts’ price targets for these other stock split stocks don’t reflect as much upside as the average price target for Broadcom.

Short term vs. long term

Broadcom’s stock price is more than 20 percent below its June high. It’s possible that the macroeconomic concerns weighing on the stock market as a whole could hold Broadcom back in the short term.

However, I think the long-term prospects for Broadcom look good, and the current sell-off provides an opportunity to buy a great stock on discount.

Should you invest $1,000 in Broadcom now?

Before you buy Broadcom stock, consider the following:

The Motley Fool Stock Advisor The analyst team has just published what they believe to be The 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could deliver huge returns in the years to come.

Consider when NVIDIA created this list on April 15, 2005… if you had invested $1,000 at the time of our recommendation, You would have $615,516!*

Stock Advisor offers investors an easy-to-understand plan for success, including instructions on how to build a portfolio, regular updates from analysts, and two new stock recommendations per month. The Stock Advisor Service has more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns as of August 6, 2024

Keith Speights does not own any stocks mentioned. The Motley Fool owns and recommends Chipotle Mexican Grill, Nvidia, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Here are the hands-down best stock split stocks to buy in August despite the market sell-off. Originally published by The Motley Fool