The clock is ticking down to October 1, when Super Micro Computer’s highly anticipated 10-for-1 stock split takes effect. As the tech giant joins the ranks of industry leaders like Nvidia, Broadcom, and others in executing a stock split, investors are left wondering: is it better to jump in now or wait until the dust settles?
Companies often opt for stock splits when their share prices reach lofty heights, making them less accessible to individual investors. By issuing additional shares to existing holders, the split reduces the stock’s price without altering its underlying value. This can attract a broader range of investors, as they can now buy in at a lower price point.
Recent history suggests that buying into a stock shortly after its split announcement can be a savvy move. Nvidia, for instance, surged 27% in the two weeks leading up to its split, while Broadcom rose 14% in the month following its announcement. However, post-split performance has been lackluster, with Nvidia dipping 4% and Broadcom remaining relatively flat.
Looking beyond the tech sector, Walmart’s stock advanced 8% from its split announcement to the actual event, and has since soared 32%. Chipotle, on the other hand, gained 2.5% during the same period, only to lose 13% afterwards.
While history provides valuable insights, it’s essential to remember that each company’s circumstances are unique. Super Micro Computer’s stock has actually fallen 25% since its split announcement, largely due to unrelated headwinds such as a negative report and a delayed 10-K filing.
Ultimately, a company’s long-term performance is driven by its earnings power and prospects, rather than the stock split itself. Walmart’s impressive gains, for example, are attributed to its strong earnings and raised forecast.
This means that investors need not rush into a decision, timing it around the stock split. Instead, they can take their time to evaluate Super Micro Computer’s fundamentals and prospects, knowing that a good or bad performance over a few weeks won’t significantly impact long-term returns.
Leave a Reply