Toyota’s Stock In Hot Water… What Broadcom’s Upcoming Stock Split Means for Investors

Happy Fathers Day!

This evening, we’ve got some stories you’ll definitely want to stay on top of as we head into the market open tomorrow morning.

To start off, we’ve got the latest updates on Toyota’s CEO scandal and the effect it could have on the company’s share price…

And then we’ll wrap up our Sunday with what analysts are expecting from Broadcom’s stock split that was just put on the calendar…

So let's get started.

Toyota’s Entire Reputation (And Stock Price) Is On The Line

If you’re a Toyota loyalist or recently bought the new Tundra… You’re all over some of the issues Toyota is dealing with right now. But it’s more than just a faulty engine recall.

This time, the drama revolves around Akio Toyoda, the grandson of Toyota’s founder, who’s facing some grumpy shareholders. Two big proxy groups want him booted from the board, thanks to some dodgy certification tests for their vehicles. This fiasco has left Toyota red-faced and their reputation for quality a bit tarnished, though it hasn’t led to any safety recalls. Still, Toyota had to hit the brakes on producing three models.

The company’s stock, which once soared to nearly $53, has now dipped to just above $197. That’s a staggering loss of about $18 billion in market value. Yikes!

Institutional Shareholder Services (ISS) and Glass Lewis & Co. are leading the charge against Toyoda. ISS, partly owned by Germany’s Deutsche Borse Group, wants Toyoda held accountable for the mess and claims his promises to fix things don’t cut it. Glass Lewis, on the other hand, believes Toyoda dropped the ball on internal controls and governance, leading to this widespread cheating scandal.

Toyota’s recent string of scandals includes dodgy tests at group companies like Daihatsu, Hino Motors, and Toyota Industries. Even other Japanese automakers like Honda, Mazda, and Suzuki are caught in similar predicaments. Glass Lewis also recommends voting against Shigeru Hayakawa, another top executive, for not beefing up the board with more independent members and suggests more transparency on Toyota’s lobbying efforts regarding climate change.

Under Toyoda’s leadership, Toyota has championed a “multi-pathway” approach to green vehicles, focusing on hybrids and hydrogen, rather than fully electric cars. Despite the hubbub, Toyoda isn’t likely to be ousted at the upcoming shareholders’ meeting, mainly because the biggest shareholders are Japanese institutions loyal to the company.

In the past year, Toyota’s profits have doubled, reaching $31.9 billion, thanks to booming sales and a weak yen. They may be lagging in the EV race, but with sales of 9.4 million vehicles, they’re still on top of the global market. Analyst Aaron Ho from CFRA Research says the scandal is just a “small dent” and doesn’t see any fundamental issues with Toyota’s management.

Toyoda himself has weathered bigger storms, like the massive recall scandal in the U.S. back in 2009. His message? “We’re not perfect, but we’ll keep fixing our mistakes.”

Market analysts, in general, are pretty optimistic. FactSet data reveals that 12 out of 19 analysts in June have rated Toyota stock as “buy” or “overweight.”. The other seven analysts are playing it safe with “hold” ratings. Seems like despite the current drama, the future of Toyota's stock still has a shiny glimmer.

What Broadcom’s Upcoming Stock Split Means For Investors

In the world of stock trading, Broadcom (NASDAQ: AVGO) might not have been on everyone’s radar, especially for consumer-focused investors. This business-to-business chip and software designer has been quietly climbing, with shares priced around $1,700 each. But now, Broadcom is planning its first stock split since it was known as Avago, set for July 12. So, what does this split really mean?

Understanding the Stock Split

Some shareholders are excited, with the stock rising 12% after the announcement. However, in practical terms, the split doesn’t change the overall value of your holdings. If you own 10 shares at $1,700 each, after the split, you’ll have 100 shares at $170 each. Your dividends will adjust accordingly too—from $21 per share on 10 shares to $2.10 on 100 shares.

Broadcom’s market cap of about $775 billion means it doesn’t need to split shares to join the Dow Jones Industrial Average, which tends to favor lower-priced stocks. And with the stock having increased more than 110-fold since its 2009 IPO, keeping a high share price is part of its identity.

Potential Benefits of the Split

Yet, there are reasons why this split could benefit Broadcom. A lower share price makes the stock more accessible to smaller investors. Plus, Broadcom’s role in AI is significant. Its semiconductors, especially application-specific integrated circuits (ASICs), are predicted by Morgan Stanley to capture 30% of the AI chip market by 2027.

Moreover, Broadcom's recent acquisition of VMWare boosts its infrastructure software segment. Their AIOps program leverages AI and machine learning to provide actionable insights, enhancing digital experiences for users.

Without the stock split, Broadcom’s advancing technology and AI innovations could drive the stock price so high that trading becomes difficult. By increasing the number of shares, Broadcom can avoid potential liquidity issues.

Making Sense of the Impact

So, is Broadcom's stock split a big deal? In some ways, yes. While it doesn’t change the fundamental value of current shareholders' stakes, it does make the stock more appealing to new investors, especially those with smaller portfolios. More shares at a lower price mean easier trading and potentially more investor interest.

As Broadcom continues to grow through its technological and AI advancements, the stock split helps pave the way for a broader base of shareholders to participate. While it may seem like a simple change, the split could indeed bring significant benefits over time.

Stocks.News does not have positions in companies mentioned.