KEY POINTS

  • Palo Alto Networks is outgrowing the cybersecurity market and doesn’t seem to be slowing down anytime soon.
  • Investors shouldn’t focus solely on Nvidia’s short-term problems, as many positive factors could increase the stock price.

The multiple stocks that have split this year already give an excellent opportunity to find stock-split stocks to grow your money. Many prominent companies have decided to split their stocks this year to lower share prices and attract retail investors. Unfortunately, even though the market has been selling off, this move hasn’t given them a break.

Palo Alto Networks (NASDAQ:PANW) announced a three-for-one stock split on August 22, following months of careful consideration. As predicted, shares of the cybersecurity specialist immediately increased after the announcement. However, they have been gradually declining due to The Federal Reserve’s hawkish policies that have impacted the market this year.

Many have seen that stock splits do not guarantee market success for investors, despite what some may think. A recent example is Nvidia‘s (NASDAQ:NVDA) four-for-one stock split announcement from May last year. While the chipmaker’s stocks shot up in value for a few months, it has taken a severe hit recently.

A stock split is just an appearance measure that increases the number of outstanding shares for a company while simultaneously lowering the stock price. However, it’s important to remember that this doesn’t affect the fundamentals or success prospects of said company. This is why beaten-down stocks such as Palo Alto Networks and Nvidia could be stock-split stocks to grow your money. Not only are they trading at attractively low prices in comparison to others, but the growth drivers present could increase their stock value significantly over time.

Here are the reasons why these two tech stocks could potentially double investors’ money.

Palo Alto Networks

The cybersecurity industry is continuing to proliferate, and Palo Alto Networks is one of the best ways to take advantage of this space. That’s because Palo Alto’s rapid growth suggests that it is gaining a larger share in this lucrative niche market.

For example, the cybersecurity market saw an annual growth rate of 8% to 11% between 2016 and 2021, as estimated by a third party. Palo Alto‘s revenue has increased faster over the last five fiscal years. They have grown from $1.75 billion in 2017 to $5.5 billion in 2022 (the 12 months ended on July 31). This compound annual growth rate (CAGR) is nearly 26%.

The great news is that cybersecurity spending will likely only continue to increase. Gartner predicts that by 2026, global cyber security expenditures could reach $267.3 billion at a CAGR of 11%. With this healthy demand for Palo Alto’s products on the rise, it won’t be astonishing if they eventually outgrow the market altogether.

Exponential growth

Palo Alto expects revenue to grow by 25% in the 2023 fiscal year, amounting to $6.85 billion to $6.9 billion. Additionally, its remaining performance obligations of $8.2 billion suggest that it could grow even faster than that – the last quarter saw a 40% increase from the prior year. This high metric is due to the value of customer contracts that Pala Alto has not yet completed.

Palo Alto expects to grow faster than it projected. Even better, its earnings are estimated to go up 26% annually in the next five years. Last year, the company had $2.52 per share in adjusted earnings. That suggests the stock could reach $8 per share within five years.

If we multiply the projected earnings after five years by Palo Alto’s five-year average forward earnings multiple of 50, we will get a stock price of $400. This would exceed the cybersecurity company’s current stock price of around $160.

Nvidia

Given that Nvidia stock has crashed by 60% in 2022, the chipmaker is currently trading at a more attractive valuation. Moreover, when comparing its current price-to-earnings (P/E) ratio of 37 to its five-year average earnings multiple of 58, it is evident that there is room for growth.

The stock may decline in the next few months as demand for graphics cards used in personal gaming computers weakens and China’s ban on sales of chips used in supercomputers takes effect. However, savvy investors may want to take advantage of any potential stock price decline and buy Nvidia shares.

Analysts are confident in the company’s long-term outlook, predicting 23% annual earnings growth over the next five years. This isn’t surprising given Nvidia’s strong growth drivers that could help it regain its momentum in the long run.

Omniverse solutions

Nvidia is investing in areas that have significant potential for growth. For example, the company’s digital twin solutions are becoming more popular. Multiple customers choose Nvidia’s Omniverse solutions to create virtual 3D representations of real-world objects or processes, commonly known as digital twins.

Even though China banned Nvidia’s chip sales, the data center space should continue to grow for the company. The data center accelerator market expects to increase five times in revenue within the next five years and reach $65 billion by 2026.

The company hopes to increase its market share with its new server processors, which could have significant long-term benefits.

Because of this, it’s unsurprising that Nvidia will experience the large growth analysts are predicting. Last year, the company reported $4.44 in earnings per share . With 23% annual growth factored in, it could see its bottom line reach nearly $12.50 per share within five years. If we multiply Nvidia’s projected earnings by its forward earnings multiple of 26, we will get a stock price of $325. This number is well over double the company’s current stock price.

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