We recently published a list of the 12 Stocks to Buy That May Be Splitting Soon. In this article, we are going to take a look at where ASML Holding (NASDAQ:ASML) stands against other stocks that may be splitting soon.
Stock splits change the number of outstanding shares of a company, but not the company’s overall value. A forward split makes each share cheaper and easier to buy. Splits can range from 2-for-1 to 100-for-1 or more. In a 2-for-1 split, one share becomes two by cutting the price in half. For instance, a $100 share becomes two $50 shares. This makes shares more affordable and attracts more investors. Even though the price per share drops, the total value held by shareholders stays the same. So, splits don’t change who controls the company. The main reason for a split is to make the stock more appealing, or accessible for retail investors.
Uncertainty is Driving Selloff
Dan Suzuki, Deputy CIO at Bernstein Advisors, joined CNBC’s ‘Squawk on the Street’ on March 14 to share his perspective on the recent persistent three-week downtrend in the indexes during an interview. He explained that the sell-off is largely driven by uncertainty and its negative impact on sentiment. According to Suzuki, analyzing market movements reveals that the stocks that rallied most after the election until mid-February have seen significant declines since then and create a mirror image effect. Additionally, the most expensive and high-beta stocks have been hit hardest as the market prices are in an uncertainty risk premium. These dynamics are central to what is driving markets currently. Despite this, Suzuki noted that hard economic data remains strong and suggests that relief from headline uncertainties could reduce the risk premium.
Suzuki noted concerns over soft retail sales and spending figures, which might be due to weather or seasonal factors. However, he highlighted resilience in weekly retail sales and strong leading indicators. Prolonged uncertainty could still impact growth. Suzuki linked consumer trends to disappointing corporate guidance and persistently high inflation, which affected sentiment. He also pointed out the wealth effect caused by a stock market decline of 10% or more, particularly for investors in crowded names. Markets are adjusting to persistent uncertainty, which will continue even with relief anticipated within the next month or two, which will prevent a return to the high multiples seen in 2020-2023.
In an uncertain market with heightened risk premiums, companies considering stock splits may need to weigh the potential benefits against the backdrop of overall market sentiment. The ongoing economic uncertainty and changes in consumer behavior might impact how companies approach decisions about stock splits, especially if they are concerned about maintaining investor confidence in a volatile market.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top stocks that were trading over $400 as of March 17. We then selected the 20 stocks with high surges in their share prices in the past 5 years and a history of stock splits. 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 Q4 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
ASML Holding (ASML) Signs Strategic AI and Semiconductor Partnership with imec
A technician in a clean room working on a semiconductor device, illuminated by the machines.
ASML Holding (NASDAQ:ASML) provides advanced lithography solutions for the semiconductor industry. It develops, manufactures, and services lithography, metrology, and inspection systems. This includes the critical extreme ultraviolet (EUV) technology, which is essential for producing cutting-edge integrated circuits.
On January 30, Argus analyst Jim Kelleher lowered the company’s price target to $1,000 from $1,250, while keeping a Buy rating. Despite the company’s record Q4 2024 revenue and earnings exceeding expectations, bookings fell 23% year-over-year. ASML Holding (NASDAQ:ASML) anticipates reduced China exposure in 2025 but expects increased demand in other major markets. EUV machines are critical for advanced chip manufacturing.
In 2024, EUV system sales reached €8.3 billion, which accounted for 44 systems, including High NA EUV. Q4 2024 alone saw €2.9 billion in EUV sales, with revenue recognized on two High NA systems. The NXE:3800E (Low NA EUV) also demonstrated strong performance. Market demand, particularly driven by AI, is fueling growth. Long-term, ASML Holding (NASDAQ:ASML) projects a 2030 revenue opportunity of €44 billion to €60 billion, with EUV systems playing a major role.
The company’s monopoly in critical lithography technology and the rising demand for advanced chips, especially for AI, position it for strong long-term growth. Baron Fifth Avenue Growth Fund stated the following regarding ASML Holding (NASDAQ:ASML) in its Q4 2024 investor letter:
“ASML Holding N.V. (NASDAQ:ASML) is a Dutch company that designs and manufactures photolithography equipment for semiconductor manufacturing. While ASML is the leader across all types of lithography, most importantly, it is the only manufacturer of extreme ultra-violet lithography tools, which are critical for the manufacturing of leading-edge chips. Shares fell 16.6% during the fourth quarter (finishing the year down 7.7%) on reduced guidance for 2025 as well as growing investor concerns about the potential impact of U.S. government restrictions on Chinese demand and the possibility of peaking lithography intensity. Despite near-term noise, we believe that the growing demand for chips in general and AI chips in particular will continue to support long-term growth for the wafer fab equipment industry with ASML’s competitive positioning remaining unassailable. While lithography as a percentage of capital expenditure may decrease from current levels, the chip layer count requiring lithography will continue to increase, in our view, as chips continue to become more complex. As a monopoly on critical lithography tools supporting an industry with growing demand fueled by the proliferation of AI, we see strong long-term upside for ASML.”
Overall, ASML ranks 5th on our list of the stocks that may be splitting soon. While we acknowledge the growth potential of ASML as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. 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.
