Investors often view stock splits favorably, as lower share prices can feel more affordable, even though they don’t change the company’s overall value. Companies that split their stocks usually have strong underlying performance, as high prices can make stocks seem out of reach.
Super Micro Computer (SMCI -1.44%) and Chipotle Mexican Grill (CMG 0.53%) are two notable examples of companies benefiting from stock splits. Should you consider investing in them now?
Super Micro Computer: 15% Gain Post-Split
Keith Noonan: Super Micro Computer is gaining attention in the AI space, with strong sales driven by demand for its servers. However, concerns arise due to a delayed financial report and bearish outlooks from some investors.
After its 10-for-1 stock split on Oct. 1, the stock rose about 15% from its pre-split price, but is still down 60% from its March peak.
Some analysts argue that Supermicro’s profit margins could shrink due to reliance on non-proprietary components, including GPUs from Nvidia. The company aims to stand out through its liquid-cooling technology and recently announced shipping over 100,000 cooled GPUs.
Despite concerns, Supermicro’s stock is valued at just 14 times its expected earnings. If the AI investment surge continues, it could yield significant gains for risk-tolerant investors.
Chipotle Mexican Grill’s Impressive 6,460% Growth
Jennifer Saibil: Chipotle has established itself as a leader in fast-casual dining and has consistently shown strong growth, even during the pandemic.
With a recent 50-for-1 stock split and ongoing increases in sales and earnings, investors remain hopeful. However, the market reacted negatively to the news of CEO Brian Niccol’s departure, as he played a crucial role in the company’s turnaround.
Even with leadership changes, Chipotle aims to nearly double its North American locations and is expanding internationally, including a new franchise in Dubai. The company’s solid strategy and growth potential make it an appealing option for investors.
