Stock splits are popular with investors. They make stocks more affordable and can also put quality stocks in the spotlight. That’s because splits are only necessary after a significant and sustained increase in the stock’s value, which in turn is often an indication of a company with solid financials and compelling growth prospects.

NVIDIA (NASDAQ: NVDA) is a prime example. The Wall Street Journal has called the chipmaker “almost invincible” because it possesses a durable competitive advantage that spans superior hardware and a robust suite of supporting software. Nvidia shares have risen 780% since January 2023 on unprecedented demand for artificial intelligence processors.

The company managed to get its soaring stock price back under control in June with a 10-for-1 stock split, its second in three years. And Wall Street remains bullish. The median price target for the stock over the next 12 months is $144 per share, representing 12% upside from the current price of $128. But some analysts see even more potential in two other stock splits.

• Broadcom (NASDAQ:AVGO) announced a 1:10 stock split in June 2024 and executed the split in July 2024. Hans Mosesmann of Rosenblatt Securities recently raised his price target to $240 per share, representing 50% upside from the current share price of $160.

• Celsius (NASDAQ: CELH) announced a 3-for-1 stock split in November 2023 and executed the split later that month. Gerald Pascarelli of Wedbush Securities recently lowered his price target to $83 per share from $85 per share, but the new estimate still represents 112% upside from the current share price of $39.

Here’s what investors should know about Broadcom and Celsius.

Broadcom: 50% implied upside

Broadcom specializes in semiconductors and infrastructure software. The company is a market leader in network chips for data centers and application-specific integrated circuits (ASICs), custom silicon chips for special use cases such as artificial intelligence (AI). For example, Broadcom supports alphabet‘s Google and Meta-platforms to develop custom AI processors and recently won a third major customer, which Reuters identified as TikTok parent company ByteDance.

Thanks to its acquisition of VMware last year, Broadcom is also the market leader in virtualization software. Virtualization allows companies to manage and use their IT infrastructure more efficiently by splitting physical hardware into multiple virtual systems. This allows multiple operating systems and applications to run simultaneously on a single physical server.

Since the acquisition, Broadcom has simplified the VMware portfolio, reducing product SKUs from 8,000 to four core offerings. The company is also moving all virtualization products to a subscription model. Going forward, Broadcom will focus on upselling offers to customers using VMware Cloud Foundation, a hyper-converged infrastructure (HCI) solution that brings together virtualized compute, storage and networking. Forrester Research recognized VMware as the leader in the HCI market last year.

The story continues

Broadcom reported strong financial results in the second quarter, beating expectations on both revenue and earnings. Revenue rose 43% to $12.5 billion on strong demand for VMware’s AI infrastructure and virtualization products. Excluding VMware’s contribution, revenue rose 12%. At the same time, non-GAAP net income rose 20% to $1.10 per diluted share.

Looking ahead, Wall Street analysts expect adjusted earnings per share to grow 24% annually through fiscal 2025 (which ends in October 2025). This consensus estimate makes the current valuation of 36.9 times adjusted earnings seem relatively reasonable. From that price, Broadcom could return 50% over the next 12 months, but investors who buy shares today should have at least three years of gain.

Celsius: 112% implied upside potential

Celsius develops and sells energy drinks through major retail channels in the United States. The company has achieved high brand awareness in its core territory and is leveraging this momentum to expand globally. It began selling its products in the United Kingdom, Ireland and Canada in the first half of 2024, with sales expected to begin in Australia, New Zealand and France in the second half of 2024.

Celsius is the third most popular energy drink in the USA. The company increased its market share by 139 basis points last year. The leading brands Red Bull and Monster BeverageMonster Energy gained 37 basis points and lost 134 basis points over the same period. In short, Celsius is catching up with the industry leaders.

The company has achieved this success by marketing its drinks as a “healthier, sugar-free alternative to traditional energy drinks.” Celsius has thermogenic properties, meaning it boosts metabolism and increases body temperature. It is clinically proven to increase calorie burn during exercise, so the brand is popular in gyms and fitness centers.

Celsius reported record second-quarter results. Revenue increased 23% to $402 million, gross margin increased 320 basis points and GAAP net income increased 65% to $0.28 per diluted share. CEO John Fieldly told analysts, “We believe we are well positioned to gain additional market share in the category.”

However, Wall Street expects the company’s earnings to grow 15% annually through 2026. This estimate makes the current valuation of 39 times earnings look quite expensive. Therefore, I doubt Celsius can deliver triple-digit returns next year and I would keep the stock on my watch list at this point.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions at Nvidia. The Motley Fool has positions in and recommends Alphabet, Celsius, Meta Platforms, and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

2 Stock Split Stocks to Buy Before They Rise 50% and 112%, According to Some Wall Street Analysts (Note: Not Nvidia) was originally published by The Motley Fool