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Stock splits have swept the market in recent years as nearly every "Magnificent Seven" stock has split its shares, as well as a number of other high-profile stocks like Shopify and Walmart.
Investors often speculate about what could be the next stock to split its shares. Stock splits don't add value or change the fundamentals of a stock. They essentially divide the stock pie into more pieces, meaning individual shareholders still own the same stake they did before. There is some evidence that stocks tend to outperform after a stock split, according to research from Bank of America, though it's not fully clear why.
This could be because companies can choose the timing of their stock splits and generally choose to do them from a position of strength when they expect the stock to keep climbing. It could also be because investors tend to respond positively to a stock split, seeing it as a signal to buy the stock.
One stock that could be next up to split its shares is ASML Holdings (NASDAQ: ASML). The Dutch maker of semiconductor manufacturing equipment now trades for more than $700 a share, making it one of the highest-priced stocks on a per-share basis on the market.
So will ASML split its stock? The company has had five splits in its history, though none in the last 10 years, and two of those were reverse splits tied to a special dividend and a synthetic buyback.
Management hasn't given any indication that it's considering a stock split, but that's not unusual. Companies usually don't discuss it until a decision has been made. Let's take a look at the case for and against an ASML stock split.
Why ASML could split its stock
Given its share price above $700, ASML certainly looks like a good candidate for a stock split.
A stock split would make the share price lower, which tends to make it more appealing to retail investors and even employees who want to buy the stock.
Splitting the stock can also act as a milestone for a company's growth as it effectively resets the share price for more growth, and investors may be expecting ASML to split its stock after so many of its peers in the semiconductor industry have done so, including Nvidia, Super Micro Computer, and Broadcom.
Finally, a stock split also acts as a sign of confidence from management, indicating that it expects the stock to keep moving higher.
Why a split is unlikely
The biggest reason why ASML is more likely to wait to split its stock is because the company has struggled lately. The stock is down year to date even as the S&P 500 index has soared this year, and the business has also faced challenges.