Super Micro Computer Announces 10-for-1 Stock Split. Here's What Investors Need to Know.
Recent advancements in artificial intelligence (AI) have sparked immense interest from consumers and investors. Companies like Super Micro Computer (Supermicro), which supply servers essential for AI, have seen their stock prices surge exponentially. Since the start of 2023, Supermicro shares have increased by a remarkable 650%, driven by high demand for AI hardware. The company's stock has risen from $8 in mid-2007 to nearly $617 per share as of the latest market close, representing gains of 7,612%.
The Fine Print
Supermicro's board of directors has approved a 10-for-1 forward stock split. This means that for each share owned, shareholders will receive nine additional shares after the market closes on Monday, Sept. 30. The stock will begin trading on a split-adjusted basis on Tuesday, Oct. 1. Shareholders do not need to take any action to receive the additional shares; the process will be managed by brokerage firms and investment banks. However, the appearance of additional shares in investor accounts may vary by brokerage and could take hours or days.
Does a Stock Split Even Matter?
A stock split increases the number of shares while reducing the price per share proportionately, leaving the total value of an investor's holdings unchanged. For example, if a share is worth $620 before the split, post-split, an investor will own 10 shares worth $62 each. This can boost investor sentiment and attract new investors due to the lower price per share.
Is Supermicro Stock a Buy?
While the stock split alone isn't a reason to buy, Supermicro's performance suggests it remains a strong investment. In its recent quarter, Supermicro reported record revenue of $5.31 billion, up 143% year over year, and earnings per share (EPS) of $6.25, up 78%. CEO Charles Liang mentioned that a shortage of server components affected profits but expects profitability to improve with a new facility in Malaysia.
The global AI market is projected to grow from $2.4 trillion in 2023 to $30.1 trillion by 2032, offering tremendous opportunities for Supermicro. With a proven track record and strong financial performance, Supermicro is a compelling investment. Currently trading at less than 2 times forward sales, it is attractively priced given the growth potential.
That's why Super Micro Computer stock is a buy.
