Many popular tech stocks have split their shares in the past two years. A stock split does not actually make the stock fundamentally cheaper, since it simply splits a stock into smaller slices to lower the trading price.
still stock split They get a lot of buzz in the media and attract small investors who don't want to pay hundreds or thousands of dollars for a share in a popular company. Stock splits also make options trading cheaper because a single contract is tied to 100 shares, and companies can offer more flexible stock-based compensation plans to their employees.
Therefore, investors should continue to pay close attention to which hot tech stocks are likely to split in the future. I think the following three companies are ripe for stock splits. mercadolibre (NASDAQ:Meri), ASML (NASDAQ: ASML)and sales force (NYSE: CRM).
1. MercadoLibre
MercadoLibre, Latin America's largest e-commerce company, went public in 2007 at $18 and currently trades at around $2,040. But even after growing a $1,000 investment to more than $113,000, the company still won't split its overpriced stock.
From 2007 to 2023, MercadoLibre's revenue grew at a compound annual growth rate (CAGR) of 38%. that steady growth The company was driven by expansion across 18 countries, rising internet penetration across Latin America, and the stability of the Mercado Pago ecosystem of digital payments and fintech services. In addition, we built a large-scale logistics network ahead of many of our competitors both domestically and internationally, creating economies of scale that reduced expenses and increased profitability.
Analysts expect MercadoLibre's revenue to grow at a CAGR of 27% from 2023 to 2026, as MercadoLibre's earnings per share (EPS) grows at a CAGR of 51%. This is an impressive growth rate for a stock trading at 41x next year's P/E.
While MercadoLibre's stock price could rise significantly on its own over the next few years, the stock split could draw in a new generation of retail investors who were initially put off by the four-digit trading price. .
2.ASML
ASML, the world's leading manufacturer of lithography systems for semiconductor manufacturing, has conducted four stock splits since its 1995 IPO. We carried out two 1-for-2 splits in 1997 and 1998, a 1-for-3 split in 2000, and a 1-for-3 split in 2000. In 2007, the company conducted an 8-9 reverse split with the aim of optimizing its capital structure. The company has soared from its split-adjusted initial public offering price of $1.85 to its current price of $834, meaning a $1,000 investment would have grown to more than $450,000.
From 1996 to 2023, ASML's revenue grew at a CAGR of 15%. The company's growth was initially driven by dominating the market for deep ultraviolet (DUV) lithography systems, which are used to optically etch circuit patterns onto silicon wafers. The company then became the sole manufacturer of the extreme ultraviolet (EUV) lithography systems needed to produce the world's smallest and densest chips. As a result, all of the world's most advanced chip foundries Taiwan semiconductor manufacturing companySamsung, and intel — Manufacture cutting-edge chips using ASML's EUV system.
Analysts expect ASML's revenue to grow at a CAGR of 13% and EPS to grow at a CAGR of 19% from 2023 to 2026. Tighter export regulations are constraining sales of advanced systems to China, but the gradual rollout of next-generation “high NA” EUV systems should offset that pressure. The company's stock still looks reasonably valued at a P/E ratio of 26 times next year, but the split could push the trading price back into double digits, making it more attractive to new investors.
3. Salesforce
Salesforce, the world's largest provider of cloud-based customer relationship management (CRM) services, went public in 2004 at a split-adjusted price of $2.75 per share. At the current price of $290, a $1,000 investment in the IPO is worth more than that. than today's $105,000. The company conducted a 4-for-1 stock split in 2013.
From fiscal year 2004 to fiscal year 2024 (ending in January 2024), Salesforce's revenue grew at a CAGR of 35%. It has grown rapidly as many companies replace desktop-based CRM software with cloud-based CRM services. We've also expanded our cloud ecosystem with more marketing, analytics, e-commerce, and collaboration services.
However, Salesforce's growth has slowed in recent years as the CRM market matures and faces tougher macro and competitive headwinds. Activist pressure also forced the company to focus on cutting costs instead of making big acquisitions to increase revenue inorganically. Analysts expect revenue to grow at a CAGR of only 9% from FY2024 to FY2027, but expect EPS to grow at a CAGR of 27% due to expense rationalization.
Salesforce stock looks historically cheap at 26 times forward adjusted earnings, and the company announced its first dividend earlier this year. But the stock split could make the company's stock, which has fallen about 3% over the past six months, a little more attractive.
Should you invest $1,000 in MercadoLibre now?
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Leo Sun He holds positions at ASML and MercadoLibre. The Motley Fool has positions in and recommends ASML, MercadoLibre, Salesforce, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: November 2024 $24 short calls on Intel. The Motley Fool has Disclosure policy.
Stock Split Watch: 3 tech stocks that may be ready for a split Originally published by The Motley Fool
