The Resurgence of Stock Splits: A Sign of Prosperity
Stock splits, once a booming trend in the late 1990s, are making a striking comeback in recent years. This corporate maneuver, ignited by robust operating and financial performances, has rekindled investor interest and driven share prices to new heights. According to data compiled by Bank of America analyst Jared Woodard, companies executing stock splits tend to experience an average share price surge of 25% in the year following the announcement, outpacing the S&P 500.
Exploring Stock Opportunities: A Glimpse into the Future
Let’s delve into three stock-split stocks that Wall Street analysts believe have significant growth potential.
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Broadcom: Unveiling Potential with 76% Upside
The technology juggernaut Broadcom (NASDAQ: AVGO) stands poised for substantial growth, offering an array of software, semiconductor, and security solutions. Dominating various sectors including cable, broadband, mobile, and data centers, Broadcom plays a pivotal role in the ongoing artificial intelligence (AI) revolution.
Boasting a remarkable second-quarter revenue of $12.5 billion, marking a 43% year-over-year increase, Broadcom continues its upward trajectory. The recent 10-for-1 stock split in mid-July, amidst a 152% gain over the past year, has left Wall Street buzzing with optimism. Analysts foresee a 76% upside potential, fueled by growing AI-related hardware sales and the integration of VMWare.
Nvidia: Riding the Wave with 99% Upside
Leading GPU supplier Nvidia (NASDAQ: NVDA) reigns supreme in the graphics processing domain essential for video games, cloud computing, and data centers. Bolstered by a stellar fiscal quarter, Nvidia’s record revenue of $26 billion and staggering 262% year-over-year growth underscore its prowess in AI processors.
Despite shares soaring by 600% since 2023 and a subsequent 10-for-1 stock split in June, analysts anticipate further growth. An optimistic 99% upside projection reflects Nvidia’s software edge in AI processors and immersive growth potential over the next decade.
Super Micro Computer: Embracing 204% Upside Potential
Renowned for supplying custom servers for over three decades, Super Micro Computer (NASDAQ: SMCI) remains a cornerstone of tech infrastructure. With a focus on energy-efficient rack-scale servers tailored for AI processing, Supermicro’s strategic partnerships with major chipmakers ensure access to cutting-edge processors.
Boasting record revenue of $5.3 billion in the fourth quarter of fiscal 2024, up 143% year over year, Supermicro’s growth story continues to inspire. The company’s legendary energy efficiency and relentless pursuit of AI-driven solutions lay the foundation for a remarkable 204% upside potential, making it a stock-split gem.
Unveiling Supermicro’s Financial Fortunes and Future Potential
Profit Surge Amidst Margin Concerns
Supermicro recently released its financial report, showcasing a remarkable surge in profits with a staggering 78% increase, resulting in an adjusted earnings per share (EPS) of $6.25 for the quarter. Despite this impressive growth, concerns arose over the company’s declining profit margin.
CEO’s Explanation and Optimistic Outlook
CEO Charles Liang attributed the profit margin decline to a bottleneck within certain server components. This bottleneck consequently led to the delay of some deals, shifting the product mix to include more lower-margin sales. However, Liang remains optimistic and anticipates a rebound in the forthcoming quarters.
Stock Price Soars and Anticipated Growth
Driven by robust results since early last year, Supermicro witnessed a phenomenal 516% surge in stock price. This accomplishment prompted the announcement of a 10-for-1 stock split. Analysts foresee a continued upward trend, with some like Ananda Baruah from Loop Capital projecting a potential upside of 204%, setting a Street-high price target of $1,500.
Potential Revenue Growth Trajectory
Analysts predict Supermicro’s revenue run rate to skyrocket to $40 billion in fiscal 2026, compared to less than $15 billion recorded at the close of fiscal 2024. Management echoes this optimism, with a guidance range of approximately $28 billion in net sales for fiscal 2025.
Market Sentiment and Analyst Ratings
Wall Street aligns with the positive outlook, as out of 17 analysts who expressed their views in July, 12 rated Supermicro stock as a buy or strong buy, with none recommending it as a sell.
Valuation and Stock Comparison
Despite the impressive growth prospects, Supermicro, along with companies like Nvidia and Broadcom, remains attractively priced. Currently trading at 14 times forward earnings, Supermicro’s valuation compares favorably with Nvidia at 36 times and Broadcom at 29 times, all higher than the S&P 500’s price-to-earnings (P/E) ratio of 27.
Investment Consideration: Broadcom
While considering an investment in Broadcom, it’s vital to note recent industry analyses. The Motley Fool Stock Advisor team identified 10 top stocks for investors to buy, with Broadcom not making the list. They emphasize the potential for significant returns in the future based on historical performance.
Reflecting on Nvidia’s historical inclusion on such a list in 2005 leading to substantial returns, it highlights the value of informed investment decisions. The Stock Advisor service has significantly outperformed the S&P 500 since its inception in 2002.
For more investment insights, interested investors can explore the latest stock recommendations from various reputable sources.
*Stock Advisor returns as of August 6, 2024