In the ever-evolving landscape of stock trading, recent trends reveal a surge in stock-split mania, primarily driven by the burgeoning interest in artificial intelligence (AI). While the broader market has thrived on the excitement surrounding AI innovations, it’s essential to acknowledge the pivotal role that stock splits have played in elevating select companies throughout 2024.
Stock splits, a mechanism enabling publicly traded firms to adjust their share prices and outstanding shares, serve more than just aesthetic purposes; they can influence investor perceptions and accessibility. A forward stock split lowers the share price, making it more attractive to everyday investors, while a reverse split, which feels more like a retreat from past performance, typically occurs during times of struggle and is mostly avoided by investors.
This year has witnessed numerous notable stock splits, with a handful of companies standing out for their impressive potential, as indicated by analyst projections. In this regard, three stock-split stocks are generating buzz, with implications for significant upside according to select Wall Street analysts.
NVIDIA: Riding the AI Wave with 45% Upside Potential
It’s no surprise that NVIDIA (NASDAQ: NVDA), a frontrunner in the AI revolution, has captured attention with its recent 10-for-1 stock split in June. Having solidified its position as the go-to supplier for the increasingly indispensable AI hardware, analyst Hans Mosesmann from Rosenblatt Securities suggests a price target of $200 per share, implying a potential 45% upside from its recent closing price.
The company’s GPUs, especially the coveted H100 models, are in high demand, driving not only their market value but also the company’s profit margins. Moreover, NVIDIA’s CUDA software continues to build customer loyalty, solidifying its ecosystem within the tech landscape. However, caution is warranted, as history tells us that innovations often face inevitable corrections, and with competitors making strides in AI-GPU development, NVIDIA must navigate increasing challenges to maintain this momentum.
Sirius XM: A Unique Position with 60% Upside Potential
Sirius XM Holdings (NASDAQ: SIRI) stands as a distinctive player in the stock-split arena this year, having executed a reverse split of 1-for-10. Analyst Matthew Harrigan from Benchmark sees a path forward that could take shares to $43, representing an impressive 60% upside based on recent trades.
Although the company has faced declining subscriber numbers, attributed to sluggish auto sales, its status as the sole licensed satellite radio operator grants it distinctive competitive advantages. With a diversified revenue stream heavily reliant on subscriptions rather than ads, Sirius XM demonstrates stability, a key factor that positions it favorably amidst economic fluctuations. The company’s still relatively low valuation, projected at around eight times forward-year earnings, further underscores its potential as a long-term investment choice.
Super Micro Computer: Leading with 111% Upside Potential
The most compelling opportunity lies with Super Micro Computer (NASDAQ: SMCI), specializing in customizable rack servers and storage solutions, which recently completed its inaugural 10-for-1 forward stock split. Analyst Ananda Baruah from Loop Capital has set an ambitious price target of $100, suggesting a sizzling upside of 111%.
Despite some skepticism, including allegations of accounting irregularities and a pending investigation by the U.S. Justice Department, Super Micro has seen astounding revenue growth, boasting a staggering 110% increase to nearly $15 billion in its latest fiscal year. Moreover, the company is projecting an ambitious revenue range between $26 billion and $30 billion for the upcoming fiscal year, potentially indicating continued robust demand in a data-driven economy.
However, Super Micro’s continued success hinges on resolving its accounting dilemmas and ensuring stable supply chains for its in-demand products, particularly NVIDIA’s GPUs, that validate its position in the data-center market.
As we look ahead, these stock-split candidates unveil exciting prospects for investors willing to navigate the market landscape. Whether through the innovative prowess of NVIDIA, the resiliency of Sirius XM, or the exponential growth potential of Super Micro, each presents a unique opportunity to explore the evolving dynamics of investment in a market captivated by technological advancements and fiscal strategies.