O'Reilly Automotive's Historic Stock Split Spurs Investor Interest: Will AutoZone Be Next?

O'Reilly Automotive's stock split was spurred by a 65,000% gain since its IPO. Its rival, AutoZone, has topped $4,000 per share for the first time in its history, sparking speculation about whether it will become the next stock-split stock. The split is cosmetic and doesn't affect the company's market cap or operating performance. It allows shareholders to vote on the proposal at the annual meeting.

The auto parts industry has seen significant growth in recent years, driven by factors such as longer vehicle lifespans and increasing demand for parts and accessories. This growth has been reflected in the stock prices of key players like O'Reilly Automotive and AutoZone. O'Reilly Automotive recently completed a 15-for-1 forward stock split, while AutoZone's stock has reached an all-time high, sparking speculation about a potential split.

O'Reilly Automotive's stock split was driven by a remarkable 65,000% gain since its initial public offering (IPO) in 1993. The company's stock price would have exceeded $1,565 without the split, making it difficult for retail investors to purchase shares. The forward split, which was approved by shareholders at the annual meeting, aims to make the stock more affordable and accessible to a broader range of investors [1].

AutoZone, O'Reilly's primary rival, has also seen substantial growth. Since its IPO in 1991, AutoZone's shares have climbed by more than 14,000%. Despite this impressive performance, AutoZone has not completed a stock split since 1994. The company's stock price recently topped $4,000 per share for the first time, raising questions about whether a stock split is imminent.

A stock split is a cosmetic adjustment that does not affect a company's market capitalization or operating performance. However, it can make shares more affordable for retail investors and potentially boost liquidity. Forward splits, like the one completed by O'Reilly, are typically seen as positive moves by investors. Reverse splits, on the other hand, are often undertaken by struggling companies to avoid delisting from a major exchange [1].

The decision to split a stock is influenced by various factors, including the composition of a company's shareholder base. If a company's shares are predominantly held by institutional investors, there may be less demand for a stock split. In AutoZone's case, only 9.4% of its shares are held by non-institutional investors, which could indicate a lower likelihood of a stock split [1].

While AutoZone's stock price has reached new heights, the company's strong financial performance and share repurchase program suggest that it may not need to split its stock. AutoZone's share repurchase program has been particularly aggressive, with the company retiring 90.3% of its outstanding shares since its inception. This program has had a positive impact on the company's earnings per share (EPS) [1].

In conclusion, while O'Reilly Automotive's stock split has made waves in the auto parts industry, AutoZone's high stock price does not necessarily indicate an imminent split. The decision to split a stock is influenced by a variety of factors, including the composition of a company's shareholder base and the company's overall financial performance. As such, investors should remain vigilant and monitor developments in both companies' stock prices and shareholder structures.

References:
[1] https://www.theglobeandmail.com/investing/markets/stocks/AZO-N/pressreleases/34041359/o-reilly-automotive-s-historic-stock-split-was-spurred-by-a-65-000-gain-since-its-ipo-is-its-biggest-rival-about-to-become-wall-street-s-next-stock-split-stock/