A lot of high-profile companies have decided to go for stock splits, and Adobe looks to be next in line.

2022 has been a year full of stock splits, and some big-name companies like Amazon, Shopify, and alphabet have taken part in the party.

Stock splits have no material effect on the valuation of companies, and this practice encourages retail investors to buy.

Adobe is a leader in computer software, and a split could be beneficial for them as the sock is close to $400 per share.

Stock split?

Stock splits occur when a company multiplies its outstanding shares without affecting its overall market capitalization. In the event that a company splits a stock you own, the value of your investment will not change; only the number of shares will change. 

So, if you own 100 shares of a company at $10 per share, and the company splits its stock 2 for 1, then you will own 200 shares at $5 each. 

Why would you do this?

It is possible for prospective buyers to become discouraged from buying stocks that trade at a high price, like Adobe.

If the share price of a stock falls, more investors could purchase it, resulting in a higher market capitalization for the company. 

It is also possible for a company’s employees to manage their equity more efficiently if its stock price is lower.

Should I buy or wait?

An investment in a company based on the possibility of a stock split is generally not a smart idea. A stock’s long-term performance is greatly influenced by its financial performance.

Therefore, it is crucial to examine Adobe’s recent performance and management guidance.