High stock prices can be a double-edged sword. On the one hand, they indicate that a company is strong and profitable enough to attract investors. On the other hand, when shares rise toward $1,000 a share, it can scare off investors and slow the flow of available capital.
To solve this paradox, companies often use a stock split. This tactic lowers the stock price while increasing the total number of shares, without affecting the company’s market capitalization. During a split, shareholders receive additional shares relative to their current holdings—for example, a 2-for-1 split doubles a shareholder’s 100 shares to 200, with each new share costing half its original value. This approach effectively lowers the stock price, making it more attractive to new investors and encouraging them to invest in the company.
While splits are usually initiated for the benefit of the company, they also present opportunities for investors. Companies that split to lower their stock price are usually quality companies, and by lowering the cost of entry, new investors have the opportunity to buy top-end shares at more comfortable prices. Furthermore, statistical evaluations of stocks after the split have shown that they typically significantly outperform the broader markets in the 12 months following the split.
We can follow this line by using the TipRanks database to pull up the details of two Strong Buy stocks that have announced upcoming splits, and see where they stand in relation to the overall markets.
Deckers brands (DECK)
We begin with Deckers Brands, a footwear company based in Southern California, where it was founded in 1973. The company offers a wide range of footwear, including casual footwear, outdoor shoes and boots, and sportswear. Deckers markets these under multiple brand names, including household names such as HOKA, Teva and UGG. The company’s brands are focused on performance, rooted in the California lifestyle of freedom and discovery, and Deckers has spent more than 50 years building its brands and reputation around the world, in more than 50 countries. Deckers’ footwear and other products can be found online, in the company’s physical stores, and in select department and specialty stores.
Deckers’ combination of quality and image has earned it a loyal customer base, which in turn has led to retail success. The company has seen consistent year-over-year revenue growth in recent quarters, and in the last reported period, fiscal 1Q25 (June quarter), brought in $825 million. This was up 22% from the same period last year and beat estimates by more than $18.8 million. Ultimately, Deckers posted earnings per share of $4.52. While this was just a penny better than expected, it compared favorably to the $2.41 reported in fiscal 1Q24. The company’s strongest revenue growth came in the Direct-to-Consumer channel, which grew 24% year-over-year, and in the U.S. domestic market, where sales increased 23% year-over-year.
This success story is reflected in the stock price: DECK shares have risen 84.5% over the past 12 months and are now trading at nearly $953 each. This is behind the company’s July 12 announcement that its board of directors has approved a 6-for-1 forward stock split, effective September 16 after the market close. On the morning of September 17, shareholders who owned DECK shares on September 6 will see their holdings increase by a factor of 6. With a current share price of nearly $953, the new share price will be set at approximately $159.
Earlier this month, TAG analyst Dana Telsey wrote about Deckers following both the split announcement and the earnings release that she was confident in the company’s business model. She wrote, “DECK is focused squarely on product and innovation, tightly controlling its brand and its presentation in the marketplace. The company has left some growth on the table to maintain scarcity. This scarcity model helps support the premium positioning of its brands, particularly in the DTC channel. Slow, controlled expansion with key partners who can maintain a brand’s positioning is designed to drive strong growth and maintain brand equity, rather than flooding distribution channels.”
Looking ahead, Telsey explains why Deckers has strong potential for continued growth, adding: “Despite raising FY25 EPS guidance last quarter on a stronger FQ1 gross margin performance, the new guidance was still below previous consensus. Nevertheless, we believe the outlook is consistent with DECK’s typically conservative stance and continue to view the company as well positioned with its healthy and more focused brand portfolio, which can continue to drive growth over the longer term.”
The analyst quantifies her stance on this stock with an Outperform (Buy) rating and a price target of $1,100, implying a 15.5% upside for the next 12 months. (Click here to watch Telsey’s track record)
There are 16 recent analyst ratings on DECK stock, split between 12 Buys and 4 Holds for a Strong Buy consensus rating. The current trading price of $952.84 and the average price target of $1,095.17 together suggest a 15% one-year upside potential. (See Deckers stock forecast)
Tetra technology (TEK)
The next stock we’ll look at, Tetra Tech, is a science and technology company that specializes in a range of environmental services, including strengthening safe water supplies; accelerating the economic transition to clean and renewable energy sources; and advancing biodiversity and conservation efforts around the world. Tetra Tech is based in Pasadena, California, and operates through 550 offices worldwide. The company employs approximately 28,000 people worldwide and handles 100,000 projects per year. It’s a lucrative business, and over the last four fiscal quarters, Tetra Tech brought in more than $5 billion in total revenue.
Tetra Tech’s services include consultancy and program management, engineering and construction management, in areas such as infrastructure, energy, resource and water management and international development. The company brings expertise in areas such as applied science, information technology, building design and maintenance and operations.
In its latest earnings report, covering fiscal 3Q24, Tetra Tech reported total revenue of $1.34 billion, a year-over-year gain of 11% — and beating estimates by $260 million. The company’s profit, reported as GAAP EPS of $1.59, beat expectations by 3 cents per share. Both the profit and the earnings were described by the company as record-breaking results.
With the fiscal earnings report, Tetra Tech also announced that its Board of Directors had approved a 5-for-1 stock split of its outstanding common stock. The split will be effective after the close of business on Friday, September 6. The split will be reflected when markets open after the weekend, on September 9, with each common shareholder’s stake increasing by a factor of 5. Based on the current value of the stock, the split will reduce the price to approximately $47 per share.
For Maxim analyst Tate Sullivan, the stock already offers investors a solid set of attributes. He writes, “We reiterate our Buy rating based on TTEK’s differentiated focus on creating solutions to environmental and water infrastructure problems, a consistent acquisition strategy of acquiring companies with government contracts in other countries and advanced analytics businesses, and a history of dividend growth.“
The aforementioned Buy rating is supported by a $268 price target, suggesting a 13% upside over the one-year horizon. (Click here to watch Sullivan’s track record)
TTEK stock has a Strong Buy consensus rating, based on 6 reviews with 5 Buys and 1 Hold. However, the $236.60 average price target implies the stock will remain rangebound for the time being. (See TTEK Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the analysts mentioned. The content is for informational purposes only. It is very important to do your own analysis before making any investment.
