When a company opts for a stock split, it’s often viewed as a positive signal, reflecting both confidence from management and significant appreciation in share price. This strategy usually follows a period of robust price growth, indicating to investors that the company expects further upward momentum. Consequently, many investors target shares that may anticipate a split, as these often present strong investment opportunities before they potentially become more appealing post-split.
Given this trend, it’s worth examining companies that are potential candidates for stock splits, particularly those still exhibiting substantial growth prospects. Investing in these firms ahead of a split might yield fruitful returns, even for long-term investors who prioritize value over timing.
Among these stocks, Microsoft (NASDAQ: MSFT) and ASML Holdings (NASDAQ: ASML) have both achieved remarkable price increases—over 600% in the last eight years. This extraordinary growth positions them as strong candidates for splits, especially considering that analysts remain optimistic about their future performances.
Microsoft’s Skyrocketing Growth
Microsoft has made strategic investments in innovative technologies, particularly in the field of artificial intelligence (AI). Their $10 billion stake in OpenAI has paid off, transforming Microsoft Azure into a leader for developers seeking to harness the power of advanced AI models. In the last quarter, Azure’s revenue soared by 30%, and the outlook remains bright, with expected acceleration in performance as Microsoft expands its data center capabilities.
Furthermore, Microsoft’s introduction of AI-driven features, such as Copilot across its software platforms, has resulted in a significant increase in user engagement—over 400 million users benefit from Office 365 alone. The average analyst price target for Microsoft exceeds $496, suggesting a potential 19% upside from current share prices, which are valued significantly at approximately 32 times projected earnings. This growth trajectory makes Microsoft a compelling option for growth-focused investors.
ASML Holdings: Riding the AI Wave
ASML Holdings has similarly benefited from the surge in demand for semiconductors, particularly with its unique EUV lithography machines, which are essential for producing cutting-edge chips. As industries shift towards advanced data capabilities, ASML is positioned to reap long-term benefits, even as 2024 is expected to be a transition year for them.
Despite anticipated flat revenues and margin pressures in the near term, ASML forecasts a significant rebound in 2025, projecting revenues of €30 billion to €40 billion, marking a 27% increase from 2023 figures. The company’s strong market positioning and ongoing innovations suggest that it may well surpass these targets, making it an attractive investment.
Wall Street’s consensus price target for ASML is around $1,127, indicating a projected 33% growth potential. With a price-to-earnings ratio of approximately 26 based on 2025 estimates and expectations for over 20% earnings growth each year for the next five years, ASML stands as a valuable addition to a growth-oriented portfolio.
In conclusion, while stock splits do not alter the underlying value of a company, they often create a wave of investor interest, especially in high-growth firms like Microsoft and ASML. With their potential for further price appreciation, savvy investors should consider these stocks as noteworthy candidates for purchase before any future splits. Furthermore, with the tech sector remaining on an upward trajectory, these companies appear poised for continued success, reinforcing their positions as top choices for those looking to capitalize on the next wave of market growth.