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 KLA Corp. (NASDAQ:KLAC) 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).
Close-up of Silicon Die are being Extracted from Semiconductor Wafer and Attached to Substrate by Pick and Place Machine. Computer Chip Manufacturing at Fab. Semiconductor Packaging Process.
KLA Corp. (NASDAQ:KLAC)
Share Price as of January 19: $757.47
Surge in Share Price in 5 Years: 323.81%
Stock Split Confirmed: No
Number of Hedge Fund Holders: 61
KLA Corp. (NASDAQ:KLAC) designs and manufactures process control, process-enabling, and yield management solutions for the semiconductor and electronics industries. It operates in 3 segments: Semiconductor Process Control, Specialty Semiconductor Process, and PCB and Component Inspection. It offers a range of technologies including wafer inspection, metrology systems, and software solutions to improve production and yield.
Its performance in the September 2024 quarter was driven by the increasing demand for AI, especially in the memory sector, where investments in AI and high-bandwidth memory are positioning memory makers for growth in 2025. This is reflected in the rising demand for AI chips, which drives higher process control intensity. Additionally, the company has been readily adopting AI by integrating it into its products and designing its computer architecture to use GPUs.
KLA Corp.’s (NASDAQ:KLAC) investments in AI-driven innovations are expected to maintain its competitive edge. The company forecasted $2.95 billion in revenue for the December quarter, with non-GAAP gross margin expected to increase to 61.5%. Earlier on January 13, Needham analysts had upgraded the company’s stock from Hold to Buy, setting a price target of $750. This reflected confidence in the company’s ability to outperform competitors in challenging times. Despite challenges in the semiconductor industry, its financial health and consistent profitability position it for growth.
Vltava Fund expressed confidence in the company along with some other key players in the growing semiconductor industry. The firm viewed them as critical investments for long-term growth and stated the following in its Q4 2024 investor letter:
“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials and Lam Research. Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation (NASDAQ:KLAC). This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.
Dozens of companies are directly or indirectly involved in the production of semiconductors. Within this broad group of companies, there are several without which it would not be possible to produce advanced types of semiconductors in the world today. These include a group of five very well-known companies, each of which has a dominant global position in its particular field, and which together operate more or less as oligopolies. These are Lam Research, Applied Materials, KLA Corporation, ASML, and Tokyo Electron. At the end of the year, we benefited from a significant correction in the share prices of Applied Materials and Lam Research, and, together with KLA Corporation, we now own three of them. We view these as one collective investment into a critical point within a very important segment of the global economy that is growing and will continue to grow over the long term…” (Click here to read the full text)
Overall, KLAC ranks 7th on our list of stocks that could split in the near future. While we acknowledge the growth potential of KLAC, 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 KLAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
