Better Stock Split to Buy: Meta Platforms vs. Sandisk

Meta Platforms (NASDAQ: META) and Sandisk (NASDAQ: SNDK) are each going through a stock split over the next few months. Sandisk is going through a traditional stock split, splitting its shares eight-for-one, effective Nov. 19. Meta's is a bit different. Instead of doing a traditional stock split of its existing stock, it's creating a new share class. This complicates things, but it's still going through a split at the end of the day.

So, which one makes the most sense to invest in? Let's take a look.

Image source: Getty Images.

Meta's stock split is unique

First, let's look at what's going on with Meta's stock. Its stock split is a bit goofy, but makes sense in the end. Overall, it's splitting its stock essentially two-for-one. It's doing this by creating a new Class C share. Class C shares will have the same value as Class A shares (the same ones any investor can buy on the market) initially, but in practice they will be worth slightly less over the long term.

The difference between Class C and Class A shares is that the new Class C shares have no voting power. This is important for Meta because, as it hands out Class C shares for acquisitions or employee compensation, CEO Mark Zuckerberg doesn't lose his voting control. This could be a red flag for some investors, but it's the direction that Meta is heading.

If you look at other stocks with split-share structures, like Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), one share class trades at a discount to the other, but it's not a big enough price difference to be a big deal. So, if you're fine with the voting power of the company residing in the founder's hands, then this is nothing more than your run-of-the-mill two-for-one stock split. But if you're concerned about where Mark Zuckerberg is taking Meta, then it may be time to abandon ship.

For the remainder of the analysis, I'll assume that the average investor is OK with Zuckerberg's controlling power. But even with that, is it enough to be a better stock to own than Sandisk?

Sandisk and Meta have two widely different growth rates

Sandisk and Meta aren't even close to being in the same industry. The closest relationship is Meta being a customer of Sandisk's, as it would buy solid-state drives (SSDs) from Sandisk for its data centers. Sandisk makes these devices, which have been in short supply due to the intensity of the artificial intelligence (AI) build-out. This has caused prices on these units to soar, and Sandisk has experienced huge growth as a result. During its latest quarter, revenue soared 378% year over year. That's simply incredible, and trumps anything Meta has delivered.

During Meta's Q3, its revenue rose 26% year over year to $64.6 billion. That's pretty fast among the big tech companies, but with how much Meta is spending on AI, investors want to see more. Still, this is a respectable result, and some of Meta's latest AI initiatives, such as Meta Muse, have received positive feedback and have seen heavy use. This could be a sign that Meta is headed in the right direction, and lead to better returns down the road.

Each stock is doing well in its industry, but there's still a huge piece of the puzzle missing: valuation. Sandisk is far cheaper than Meta, but that's because the market is concerned about a cyclical downturn in the industry once demand isn't as rampant.

SNDK PE Ratio (Forward) data by YCharts

With Sandisk growing rapidly and being priced so cheaply, I think it's the stock that I want to buy and hold right now. However, you'll have to keep a close eye on it to make sure that market conditions don't shift in the memory chip industry. If you're looking for a more set-it-and-forget-it type investment, then Meta makes more sense, as it's still in a great position to profit from the AI arms race if it continues to see success as it has in recent months.

Keithen Drury has positions in Alphabet and Meta Platforms. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.