3 Stock Split Opportunities Investors Should Pay Close Attention To
Stock splits, once rare, are roaring back into focus for traders and investors alike. In January, Walmart (NYSE:WMT) became the latest company to announce a three-for-one stock split followed by Williams-Sonoma’s (NYSE:WSM) two-for-one split. This trend has continued, with plenty of other stock split opportunities worth paying attention to.
Compared to other tech cycles, like the tech bubble in the 1990s, stock splits are rare. By the mid-2000s, stock splits dropped dramatically, and nearly ceased after the 2008 financial crisis. Institutional investors diminished their importance as the dollar value of certain trades tend to not matter as much as with the retail investor crowd. Recent stock splits announced by big companies like Nvidia (NASDAQ:NVDA) and Chipotle Mexican Grill (NYSE:CMG) make stock ownership to be more accessible to the public and broaden out investor bases. That’s good for companies and retail investors alike.
However, a stock split does not necessarily impact the company’s overall future performance or fundamentals. Investors will simply hold more shares at a lower price. Despite some splits this year not boosting stock prices significantly, three companies are worth watching for potential splits.
MicroStrategy (MSTR)
Recently reporting its Q2 2024 results, MicroStrategy (NASDAQ:MSTR) now holds over 226,500 Bitcoin (BTC-USD) that are valued 70% above its cost basis. The company introduced a new KPI, “BTC Yield,” aiming for 4% to 8% annual returns over the next three years. CEO Phong Le noted optimism about growing Bitcoin adoption and increasing global demand for its cloud-based business intelligence and artificial intelligence software, which saw strong double-digit growth in subscription revenue and billings.
MicroStrategy’s heavy investment in Bitcoin has led the company to hold 214,400 Bitcoins. This factor alone likely impacts its stock more than its stock split. According to other history records, MSTR and BTC prices move together. If one surges, the other surges as well. Recent digital asset issues and losses that reached $191.6 million exceeded the $115.2 million revenue in the last quarter. This emphasizes the influence of Bitcoin on MicroStrategy.
Moreover, the company announced a 10-for-1 stock split recently. The split will take place through a stock dividend. The distribution will happen on Aug. 7. Split-adjusted basis trading will begin the day after on Aug. 8.
The upcoming stock split for MicroStrategy is highly anticipated. With MSTR up 156% this year, buying now may be risky. Investors may want to consider owning MSTR stock now, as analysts have price targets for it ranging from $210 to $2000.
Super Micro Computer (SMCI)
Once a small-cap stock, Super Micro Computer (NASDAQ:SMCI) isn’t one anymore as it has a $29 billion market valuation. Impressively, SMCI stock saw a 246.2% surge last year and 188.2% in 2024 so far. Before it entered the S&P 500 and later Nasdaq 100, SMCI peaked at $1,229 in February. While stock splits don’t alter company value, they often signal management’s confidence. With its recent gains, Supermicro, as it is known, might consider a split to sustain its valuation.
The stock surged 300% in 2024 due to high demand for its AI servers and liquid-cooled solutions. Moreover, it impressed investors as it gained 1,000% in 2023 due to the AI trend. The company now has strong fundamentals that can back up investors during market turbulence.
Supermicro recently reported an impressive Q3 report. Revenue reached $3.85 billion, as net income improved fourfold, reaching $402 million. Wall Street is strongly bullish for SMCI and its strong performance. This could lead its first-ever stock split this year.
Supermicro capitalized on AI with its efficient server designs, boosting revenues and market share. Trading at 48.8 times earnings and 24.8 times 2025 estimates, its growth mirrors Nvidia’s, partly due to using Nvidia’s chips. Future growth will depend on the broader AI accelerator market.
ServiceNow (NOW)
ServiceNow (NYSE:NOW), an enterprise software provider, saw significant growth due to AI’s rise. In Q2, it reported a 25% year-over-year increase in subscription revenue to $2.54 billion, driven by its GenAI cloud platform. Total revenue rose 24%, with earnings at $3.13 per share. The company expects a 20% rise in subscription revenue for the current quarter and 22% for the year.
Companies often split their stock when shares rise sharply, as they seen as expensive to retail investors. Although a split doesn’t affect company value, lower prices attract new investors. Since its 2012 IPO, ServiceNow’s stock has surged 2,970%, with a recent 77% increase driven by AI trends. At $755 per share and with no prior splits, ServiceNow might consider a split to align with tech peers and capitalize on further growth.
ServiceNow’s Now Assist, powered by Microsoft Co-Pilot, boosts workflows with AI tools. In 2023, revenue surged 24%, with a 33% rise in $1M+ contracts and a 427% earnings increase. With the recent quarter surpassing estimates, this prompts a higher subscription outlook and a “strong buy” rating.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
