We have not seen any stock splits on the market for quite several years, but now big companies now seem to be eager to reverse course. $NVIDIA Corp(NVDA)$ has became the fifth of the "Magnificent Seven" stocks to split its shares in less than four years, announcing a 10-for-1 stock split that's set to go into effect on 07 June, and it will start trading today (10 June) on the stock split.
Since the stock split announcement, Nvidia stock price have been up roughy 20%, strong earnings report has contributed to this significant increase. This year in 2024, Nvidia has joined Walmart and Chipotle as stock-split winners.
Following their stock-split announcements, these three stocks have post significant gains, so as investors, I guess it is almost a routine to ask ourselves which company would come up next. If we look at how the semiconductor sector have been performing on the back of the Nvidia strength, we could see these two semiconductor manufacturers as potential candidates.
Will ASML Be The Next Chip Stock Up For Stock Split?
$ASML Holding NV(ASML)$ share price have been trading near $1,000, this has put themselves up as a good candidate to be the next big semiconductor stock to do stock split.
In order to look at what are the factors that usually help trigger a stock split, ASML seems to have met some if not most of them. ASML has experienced significant price appreciation in recent years, over the last five years, their stock price are up more than 400%, and more than 1,000% if we consider the past decade.
Next, the individual stock price is higher than $1,000, the last closed price at last Friday (07 June) was $1028.42, this is way above where Nvidia’s was when it announced its 10-for-1 stock split. Their management are also increasing confident as they are entering a new demand cycle due to the explosive demand for A.I. chips.
In the history for ASML, it has three stock splits but since 2000, there have not been any. ASML, which makes the equipment that chipmakers like Taiwan Semiconductor Manufacturing use to produce chips.
ASML even had an unusual 8-for-9 reverse split in 2007, which was enacted in combination with a plan to return 960 million euros to shareholders. Though there have not been any indication that ASML is planning for a stock split, there might be a likelihood if ASML stock price continues to rise.
ASML has not given any indication that it plans a stock split, but it seems as though one is likely if its stock price continues to rise.
If we looked at NVDA, TSM and ASML, their price correlation have been pretty positive, so if NVDA and TSM continue to show strength in their stock price, I believe ASML would have a shorter runway to its stock split.
Is This A Good Time To Buy ASML Now?
If we were to consider the earnings result given by ASML, it has a history of delivering strong results for investors due to its steady growth and high profit margins. It also has one of the widest economic moats in the semiconductor industry.
ASML is the leading maker of lithography systems used to make semiconductors, and it is the only manufacturer of extreme ultraviolet (EUV) lithography systems, which make advanced chips that are as small as 2 nanometers. ASML says that its EUV tech prints microchips with light at a wavelength of 13.5 nm, which is nearly X-ray range. ASML makes highly technical machines that are very expensive, and it only sells about 100 of them each quarter. Because of that, its results tend to be cyclical, and revenue recently declined on a year-over-year basis.
Something To Take Note
ASML is currently undergoing a transition year as its non-EUV business declines, and the company expects revenue growth to accelerate in the second half of this year and into 2025. Among the catalysts it sees in 2025 are secular growth in semiconductor end markets, including green energy, electric vehicles, and artificial intelligence.
Something positive would be the broader cyclical upturn in the chip sector, as well as a large number of new fabs planned that are going to rely on ASML's equipment.
So I personally would still look at how ASML technicals is showing us, and not forgetting TSM as well, because this is the company which should be considered closely correlated with, other than Nvidia.
If we were to consider how ASML have been trading since Nvidia has make quite a significant run, we could see that it has actually benefited from it, but on its own, ASML does show potential in terms of MACD and KDJ, both these 2 indicators are showing potential upside signal.
I would look at the price action for ASML upon Nvidia stock split trading today (10 June), to get in a potential reasonable price target.
Like I have mentioned earlier, we will need to look at $Taiwan Semiconductor Manufacturing(TSM)$ as well. Because if TSM did well, we could see that ASML would also benefit.
From the 2 indicators below, MACD is forming a positive crossover, and the KDJ is showing a promising upside. This might be a time to look buying TSM as well.
Summary
I would think that regardless of whether ASML announces a stock split anytime soon, the shares still look like a buy.
As we can see that due to the A.I. demand and revolution moving very fast, demand for semiconductors is only growing, and with it, the demand for the advanced chips that ASML's systems specialize in making, and that should help widen ASML economic moat.
Appreciate if you could share your thoughts in the comment section whether you would consider to look at ASML for a potential buy?
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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