Possible Stock Splits in 2024: 2 Growth Stocks Up 437% and 541% in 7 Years to Buy Now, According to Wall Street

Forward stock splits usually follow significant share-price appreciation, which rarely happens to inferior companies. For that reason, many investors see stock splits as roundabout indicators of quality. But the price appreciation (not the subsequent split) is where investors should focus.

Shares of Microsoft (MSFT -0.49%) and Intuit (INTU -0.27%) soared 541% and 437%, respectively, over the last seven years. That price appreciation qualifies both companies as stock-split candidates. More importantly, it hints at some competitive advantage that has translated into long-term outperformance. Investors should strive to own such stocks.

Indeed, Wall Street analysts see Microsoft and Intuit as worthwhile investments right now whether or not they split their stocks in the future. Microsoft carries a median price target of $475 per share that implies 22% upside from its current price. And Intuit carries a median price target of $720 per share that implies 15% upside from its current price.

Here’s what investors should know.

Microsoft: 541% return over the last 7 years

Microsoft has two important growth engines in enterprise software and cloud computing. The company has a virtual monopoly in office-productivity software (Microsoft 365), and it has a strong presence in enterprise resource-planning software and low-code development tools. In total, Microsoft accounted for 18% of commercial software sales in 2023, and it’s forecasted to gain share as generative artificial intelligence (AI) copilots become larger revenue streams in the coming years.

Additionally, while Microsoft Azure still trails Amazon Web Services (AWS) in cloud-infrastructure and platform-services sales, Microsoft narrowed the market-share gap from 11 points in 2021 to 7 points in 2023, according to Statista. Microsoft’s strength in AI, as well as its strong presence in cloud-based data and cybersecurity solutions, could help it take more share in the future. Indeed, Morgan Stanley thinks Azure could surpass AWS by 2027.

Microsoft reported solid financial results in the fiscal third quarter (ended Mar. 31). Revenue increased 17% to $61.9 billion, and generally accepted accounting principles (GAAP) net income jumped 20% to $2.94 per diluted share. That strong performance was due in large part to momentum in cloud computing fueled by demand for AI services. CEO Satya Nadella said more than 65% of Fortune 500 companies use Azure OpenAI Service, a platform for building custom generative AI applications with large language models from OpenAI.

To summarize, Microsoft has two powerful tailwinds at its back in growing demand for enterprise software and cloud services, both supercharged by opportunities to monetize artificial intelligence. As such, Wall Street expects the company to grow earnings per share at 16% annually over the next five years. That consensus estimate makes its current valuation of 34.4 times earnings look somewhat pricey, but investors who want to own shares should be prepared to pay a premium.

Ultimately, Microsoft stock outperformed the S&P 500 over the last one, three, and five years, and I think the stock can outperform over the next five years from its current valuation.

Intuit: 437% return over the last 7 years

Intuit specializes in tax preparation and accounting software. The company has two well-known product ecosystems in TurboTax and QuickBooks. TurboTax is the most popular tax-preparation tool among U.S. consumers, and Intuit is working to better monetize that ecosystem with TurboTax Live, a product that connects users with tax professionals who provide assisted or full-service tax-return preparation.

Similarly, QuickBooks is the most popular accounting software among small businesses and self-employed individuals in the U.S. Here, Intuit has taken a similar tack with QuickBooks Live, a product that connects users with experts who provide assisted or full-service bookkeeping. Intuit also strives to upsell small businesses with adjacent services for financing, marketing, payroll, and payment processing.

Intuit looked strong in the second quarter of fiscal 2024 (ended Jan. 31). Revenue rose 11% to $3.4 billion on impressive momentum in the QuickBooks segment. Meanwhile, non-GAAP net income jumped 20% to $2.63 per diluted share. On the earnings call, CEO Sasan Goodarzi provided encouraging commentary on the current quarter. "While it’s early in the season, TurboTax Live Full Service is resonating with customers." That bodes well for the company because management sees assisted tax preparation as a largely unpenetrated $31 billion market.

As a caveat, Intuit faces a potential threat from the IRS’s Direct File program, which lets eligible taxpayers file federal returns for free. Most analysts see the program as a non-issue because adoption of free tools has historically been low. Indeed, while the Direct File program is still in its early stages, it processed just 140,000 returns in 2024. That represents just 0.1% of the 128.7 million individual returns the IRS expected by the filing deadline.

Going forward, Wall Street expects Intuit to grow earnings per share at 28% annually over the next five years. In that context, its current valuation of 64.7 times earnings looks a little pricey but not unreasonably expensive. Intuit stock outperformed the S&P 500 over the last one, three, and five years, and I think the stock can outperform over the next five years from its current valuation.