Eli Lilly Stock Split: A Likely Scenario in 2024?

Eli Lilly and Company (LLY) has been on a remarkable run in recent years, with its stock price soaring by nearly 700% since 2019. As of this writing, the stock is trading at around $908 per share, raising the question of whether the company might consider a stock split in the near future. This article explores the potential benefits, drawbacks, and likelihood of a stock split for Eli Lilly.

Potential Benefits of a Stock Split

1. Increased accessibility: A stock split could make Eli Lilly's shares more affordable for individual investors, potentially attracting a broader range of investors and increasing liquidity. For instance, if Eli Lilly were to split its stock 2:1, a share currently priced at around $900 would become $450, making it more accessible to retail investors.
2. Potential price increase: Historically, stock splits have been followed by an increase in stock price. For example, after Nvidia's 4:1 stock split in 2020, its stock price more than doubled within a year. A similar phenomenon could occur for Eli Lilly, driving up the stock price and potentially increasing shareholder wealth.
3. Improved market perception: A stock split could signal to the market that Eli Lilly's management is confident in the company's future prospects, potentially enhancing its reputation and attracting more investors.

Potential Drawbacks of a Stock Split

1. No fundamental change: A stock split does not change the company's fundamentals, such as earnings per share or revenue. It only changes the number of shares outstanding. Therefore, it may not have a significant impact on the company's intrinsic value.
2. Potential dilution: If Eli Lilly issues new shares as part of the stock split, it could dilute the value of existing shares. However, this is not typically the case with stock splits, as they usually involve a simple division of shares without issuing new ones.
3. Potential market confusion: Some investors may view a stock split as a sign of weakness or uncertainty, as it could indicate that the company's stock price has become too high for some investors to afford. This could potentially lead to a temporary decrease in the stock price.

Likelihood of a Stock Split in 2024

Several factors suggest that Eli Lilly might consider a stock split in 2024:

1. Stock price: Eli Lilly's stock price is currently around $900 per share, which is relatively high compared to other pharmaceutical companies. A stock split could make the shares more affordable and accessible to a broader range of investors.
2. Market capitalization: Eli Lilly has a high market capitalization, indicating that the company is large and well-established. A stock split can help increase liquidity and make the stock more attractive to investors.
3. Growth prospects: Eli Lilly has a strong pipeline of new drugs and has been performing well in recent years. The company's growth prospects may increase the likelihood of a stock split, as it can make the shares more appealing to investors.
4. Historical stock splits: Eli Lilly has a history of stock splits, with the last one occurring in 1997. The company may consider another stock split to maintain a consistent share price level and make the stock more accessible to investors.
5. Analyst expectations: Some analysts, such as those from Berenberg and JPMorgan, believe that Eli Lilly's stock price could reach $1,000 per share in the near term. If the stock price continues to rise, a stock split may become more likely to make the shares more affordable.

In conclusion, a stock split for Eli Lilly could potentially offer several benefits and drawbacks, as well as impact the company's long-term growth prospects. While a stock split does not change the company's fundamentals, it could make the shares more affordable and accessible to a broader range of investors, potentially driving up the stock price and enhancing the company's reputation. The likelihood of a stock split in 2024 is high, given Eli Lilly's strong growth prospects, historical stock splits, and analyst expectations. However, the ultimate decision will depend on the company's management and market conditions.