In recent years, there has been a resurgence in the popularity of stock splits. The practice was common in decades past, but had fallen out of favor and recovered in recent years. Companies will typically embark on this path after years of strong business and financial results, resulting in skyrocketing share prices.
The evidence suggests that the strong performances that precipitated stock splits tend to continue. Companies that perform stock splits see stock price gains of 25%, on average, in the year following the announcement, compared to average increases of 12% for the following year. S&P 500according to data collected by bank of america Analyst Jared Woodard.
Here are three split stocks that still have a long way to go, with gains of up to 215%, according to select Wall Street analysts.
1. Broadcom: implied 36% increase
The first of our stock splits that represents an attractive opportunity for investors is Broadcom (NASDAQ: AVGO). The company offers a host of software, semiconductor and security products that run the gamut across the data center, broadband, cable and mobile spaces.
In fact, the company reports that “99% of all Internet traffic passes through some type of Broadcom technology.” This means Broadcom technology will be instrumental in the adoption of artificial intelligence (AI).
The company’s recent results are revealing. In Broadcom’s fiscal third quarter (ended August 4), revenue increased 47% year over year to $13 billion, boosting adjusted earnings per share (EPS) 18% to $1.24 . The company continues to integrate VMWare, which has pressured earnings, but management expects a more significant contribution in fiscal 2025. Broadcom also raised its full-year revenue guidance to $51.5 billion, which would represent a growth of almost 44%.
The company’s track record of strong, consistent growth led to a 10-for-1 stock split in July. The stock has more than tripled since early 2023, which coincided with the start of the AI revolution, but many on Wall Street believe the best is yet to come. Rosenblatt Securities analyst Hans Mosesmann maintains a buy rating on Broadcom shares and a street-high split adjusted price target of $240. This represents a potential gain for investors of 36% compared to Friday’s closing price.
Mosesmann suggests management’s guidance is conservative, leaving the possibility of upward revisions. He sees particular opportunities in Broadcom’s application-specific integrated circuits (ASICs) and ancillary products that support networking and switching, which will see increased AI-related demand. He also says the VMWare integration will boost Broadcom’s results.
Mosesmann is not alone in his bullish prediction. Of the 39 analysts who rated the stock in September, 35 rated the stock a buy or strong buy, and none Recommended sale.
Investors might be surprised to learn that Broadcom stock is trading at less than 28 times next year’s expected earnings, which I think is a bargain considering its long history of growth and expansive opportunities.
2. Nvidia – 85% implied increase
The second action divided into actions with a long way to go is NVIDIA (NASDAQ: NVDA). The company’s graphics processing units (GPUs) have become the gold standard for a variety of applications, including gaming, cloud computing, and data centers. This technology is also fundamental in generative AI processing, providing the computational power that makes it possible.
This, in turn, has driven blockbuster results for Nvidia. For its fiscal second quarter of 2025 (which ended July 28), Nvidia generated record quarterly revenue that increased 122% year over year to $30 billion, while its diluted earnings per share (EPS) soared 168%. % at $0.67. Results were boosted by the company’s data center segment, which includes chips used for AI, as revenue rose 154% to $26.3 billion.
That marked Nvidia’s fifth consecutive quarter of triple-digit sales and earnings growth, while its shares have risen 754% since the start of 2023, leading to a 10-for-1 stock split. a rollercoaster in recent months, first losing more than a quarter of its value, then staging a remarkable recovery and now sitting less than 8% from its all-time high.
There’s probably more to come, but don’t just take my word for it. Rosenblatt analyst Hans Mosesmann reiterated his buy rating and $200 top price target on Nvidia, representing potential gains of 60% compared to Friday’s closing price.
The analyst believes investors are missing an important element of Nvidia’s success, saying: “The real narrative lies in the software that complements all the goodness of the hardware. We anticipate this aspect of software will increase significantly over the next decade in terms of overall sales mix, with an upward bias in valuation due to sustainability.”
He is not the only one who believes that Nvidia has a long way to go. Of the 60 analysts who issued an opinion in September, 55 rated the stock as a buy or strong buy, and none Recommended sale.
I have no doubt about the potential for Nvidia stock to go up from here. In fact, I think the analyst’s price target could very well be conservative.
3. Super Micro Computer – 215% implied increase
Admittedly, the last of our trio of stock splits is the most controversial. super microcomputer (NASDAQ:SMCI)also known as Supermicro, has been a leading provider of custom-designed servers for over 30 years.
The company’s secret weapon is the basic architecture of its rack-scale servers. By designing interlocking core components, Supermicro customers can create the system that best fits their specific needs (and price range) rather than simply pulling something off the “shelf.” The company is also a clear leader in the area of direct liquid cooling (DLC), which is uniquely suited to address the rigors of AI. CEO Charles Liang estimates that Supermicro controls 70% to 80% of the DLC market.
In its fourth quarter of fiscal 2024 (which ended June 30), Supermicro generated record revenue that increased 143% to $5.3 billion. At the same time, the company saw adjusted earnings per share increase 78% to $6.25. While the decline in profit margins raised eyebrows, Liang attributed the decline to a temporary bottleneck in components and product mix and expects a recovery in due course. That said, the company’s track record of strong results preceded a 10-for-1 stock split, which was completed earlier this week.
However, Supermicro has become a battleground stock in recent weeks. In late August, a brief report from Hindenburg Research alleged accounting irregularities, sanctions violations and undisclosed third-party transactions, among other accusations. The next day, Supermicro delayed the filing of its annual report, citing the need to evaluate the “effective design and operation of its internal controls.” If that wasn’t enough, a report emerged suggesting the US Department of Justice was investigating the company, according to the Wall Street Journal.
Despite the resulting uncertainty, some on Wall Street are unfazed. In the wake of these revelations, Rosenblatt analyst Hans Mosesmann maintained a Buy rating and a split-adjusted high street price target of $130 on the stock. This represents a 215% upside potential compared to Friday’s closing price. The analyst suggests that the recent share price correction “seems overblown if one considers Hindenburg’s momentum to be old or inaccurate news.”
It’s no surprise that others on Wall Street have adopted a “wait and see” strategy. Of the 18 analysts who covered the stock in September, nine still rate the stock as a buy or strong buy. The rest recommend holding on, and none We recommend selling.
As a short seller, Hindenburg Research has a vested interest in driving down the stocks it targets, so its motives are suspect. Furthermore, he has a mixed record, so his conclusions should not be considered evangelical.
For investors with the stomach for a little risk, I think the opportunity to own Supermicro stock outweighs the risk posed by a short seller’s (so far) unsubstantiated claims. And as a Supermicro shareholder, my money is where my mouth is. Finally, at just 21 times earnings, Supermicro stock is a bargain.
Should I invest $1,000 in Broadcom right now?
Before you buy Broadcom stock, consider this:
He Varied and Dumb Stock Advisor The analyst team has just identified what they believe are the 10 best stocks for investors to buy now… and Broadcom was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when NVIDIA made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $765,523!*
Stock Advisor provides investors with an easy-to-follow success plan, including guidance on how to build a portfolio, regular analyst updates, and two new stock picks each month. He Stock Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
See the 10 actions »
*Stock Advisor returns as of September 30, 2024
Bank of America is an advertising partner of The Ascent, a Motley Fool Company. Danny Vena has positions at Nvidia and Super Micro Computer. The Motley Fool has positions and recommends Bank of America and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Three Split Stocks to Buy Before They Soar Up to 215%, According to Select Wall Street Analysts was originally published by The Motley Fool