We recently published a list of 12 Stocks That Could Split in the Near Future. In this article, we are going to take a look at where ASML Holding NV (NASDAQ:ASML) stands against other stocks that could split in the near future.
Stock splits don’t change how much a company is worth, but they make each share cheaper and easier for people to buy, considering it’s a forward split. Stock splits can vary from a simple 2-for-1 split to a larger 100-for-1 split or more. In a 2-for-1 split, each share is turned into two new shares. This makes each share half the price, but the total value of the company remains the same. For example, if a share costs $100, after a 2-for-1 split, you’ll have two shares that cost $50 each. This can make it easier to buy shares and attract more people to invest. Even though the share price goes down, the total amount of money paid out to shareholders stays the same. Hence, splitting shares doesn’t change how much control existing shareholders have in the company. The main goal is to make the company’s stock more appealing to investors. There’s no proof that stock splits make a company better, but they can make investors feel more positive about the company. But with these benefits come the costs and risks. The process requires legal work and can be expensive.
Splitting a stock doesn’t change a good company into a bad one or vice versa. The price might go up a bit after the split, but it won’t change the company’s long-term fundamentals. Sometimes, a low stock price can actually look bad for a big company. Still, many companies practice splitting stocks if their share prices are growing too high.
2025 Outlook
On January 16, Mark Newton, Fundstrat Global head of technical strategy, joined ‘Squawk Box’ on CNBC to discuss that the long-term market trends look positive. The market initially experienced a cooler-than-expected jump, but concerns were raised about the breadth of the market and the potential impact of interest rates on small-cap stocks. Mark Newton expressed a constructive view but noted that the market’s breadth had deteriorated significantly, with only about 25% of stocks currently above their 50-day moving average. This decline was particularly evident in sectors like healthcare, where seven sectors lost more than 4% in the last month.
Despite these challenges, Newton highlighted that technology stocks had rebounded, helping to keep indices afloat and maintaining long-term trends. However, he noted that near-term sentiment had become pessimistic regarding the potential policies of the president-elect, which added to market uncertainty. He maintained his target for the S&P 500 at 6650, suggesting that interest rates might begin to roll over in the coming months, which could be bullish for equities given their recent correlation with treasury yields.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top stocks trading over $400 as of January 19. We then selected the 20 stocks with high surges in their share prices in the past 5 years and a history of splitting stocks. From that, we picked the top 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician in a clean room working on a semiconductor device, illuminated by the machines.
ASML Holding NV (NASDAQ:ASML)
Share Price as of January 19: $756.33
Surge in Share Price in 5 Years: 152.08%
Stock Split Confirmed: No
Number of Hedge Fund Holders: 64
ASML Holding NV (NASDAQ:ASML) provides advanced semiconductor equipment systems. The company specializes in cutting-edge technologies like extreme ultraviolet (EUV) and deep ultraviolet (DUV) lithography systems, as well as metrology tools to ensure chip quality.
The company maintains a near-monopoly status in EUV technology. This helps create tiny features on silicon chips required for advanced applications like AI, 5G, and high-performance computing. EUV machines are costly and often exceed $300 million per unit. In Q3 2024, ASML Holding NV (NASDAQ:ASML) made €5.9 billion in total revenue, with €2.1 billion of that coming from EUV sales.
However, the company faces challenges due to US export controls tied to the US-China rivalry. While it has historically sold its DUV lithography machines to China, the sale of its EUV machines remains restricted. In 2023, China accounted for 29% of ASML’s total sales, but this is projected to decrease to ~20% by 2025 due to the restrictions. Additionally, ASML Holding NV (NASDAQ:ASML) expects to ship fewer than 50 EUV tools globally in 2025, a decrease from earlier projections made in 2022.
The company remains relevant due to investments from the US government, especially under the CHIPS and Science Act. This allocates around $52 billion for semiconductor manufacturing and research in the US. In December 2024, BNP Paribas Exane began coverage of the company with an Outperform rating and €817 price target, citing its market dominance and a projected 6% revenue increase by 2030.
Impax Global Environmental Markets Fund believes that the concerns about ASML Holding NV’s (NASDAQ:ASML) stock price due to potential US export restrictions to China are overstated, given its market dominance in EUV lithography. This is what the firm said regarding the company in its Q3 2024 investor letter:
“ASML Holding N.V. (NASDAQ:ASML) (Efficient IT, Netherlands) similarly to other semiconductor production-equipment makers, the share price has been under pressure on speculation the US may impose additional restrictions on China’s access to semiconductors and equipment. In addition, Intel’s results raised investors’ concerns that ASML would be disproportionately affected by a cutback on capex at Intel, which is a significant customer. The investment team believes these concerns are largely overblown given ASML’s dominant position in extreme ultraviolet (EUV ) lithography for advanced chips, which is where current investment is focused.”
Overall, ASML ranks 5th on our list of stocks that could split in the near future. While we acknowledge the growth potential of ASML, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ASML but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.