Super Micro Computer or Lam Research: Analysts choose the superior stock split play for this week

Stock splits are often viewed as a sign of confidence in a company’s growth because they typically occur after significant increases in stock price. In a stock split, shareholders’ ownership is not diluted. Instead, each shareholder receives additional shares in proportion to their current holdings and the price of each share is adjusted accordingly. For example, in a 2-for-1 split, shareholders have twice as many shares, but each share is only worth half as much. The total value of their holdings remains unchanged.

These transactions usually lead to the desired result. The fact of the split attracts attention and makes headlines, while the lower share price attracts new investors. The result is a positive development of the company combined with an influx of new capital. Even better, for investors, the historical data shows that the stocks will significantly outperform the S&P index in the first 12 months after the split.

The Street’s analysts watch stock splits closely and aren’t afraid to recommend investors buy them to make the most profit. Using the TipRanks database, we took a look at two big tech stocks with high prices and upcoming stock splits, Super Micro Computer (NASDAQ:SMCI) and Lam Research (NASDAQ:LRCX), and a look at analyst commentary will tell us which one is the one Street picks as the superior stock split buy ahead of upcoming stock split activity this week.

Super microcomputer

First up is Super Micro Computer, a Silicon Valley technology company that specializes in the design, development and production of advanced computing hardware, including high-performance computing systems and AI-enabled server stacks. In addition, Super Micro provides enterprise management software and storage solutions critical to 5G networks, AI, cloud computing, data centers and edge computing applications.

Super Micro has more than 30 years of experience in the technology field and its up-to-date expertise makes it a one-stop shop for customers with high-end computing needs. The company can design and build complex server stacks and high-performance computers in-house and install them at any scale to cover a variety of end applications. Super Micro meets these needs with a combination of standard parts and custom parts, both based on the company’s existing product lines, and can customize end products to unique, one-off design requests. The company has a large production area and can produce approximately 5,000 AI, HPC and liquid cooling rack solutions per month with current capacities.

The expansion of AI – particularly generative AI – has been a boon for Super Micro. The company’s high-performance computing products are well-suited to the AI ​​space, providing the combination of high speed and expanded storage capacity required for AI applications. This surge in demand pushed the stock price to nearly $1,200 earlier this year. Although the stock has since retreated, it remains above $400, up 46% year-to-date.

That helps explain the 10-for-1 stock split coming up for Super Micro on October 1st. The split will multiply each shareholder’s holdings of shares by 10 and reduce the price below $42.

Looking at recent financial results, Super Micro reported 4Q24 revenue of $5.3 billion, up 143% year-over-year and beating expectations by $10 million. However, despite a solid non-GAAP EPS of $6.25, it was still $1.56 below guidance, which management attributed to higher operating costs and lower gross margins.

The company’s story recently took a dramatic turn. A report from short seller Hindenburg Research made serious allegations of “accounting manipulation, sibling abuse and sanctions evasion.” Adding to investor concerns, Super Micro delayed filing its annual 10-K report.

JPMorgan’s Samik Chatterjee, a 5-star analyst ranked in the top 4% of equity professionals on the Street, has noted these developments and foresees regulatory challenges ahead.

“While the Company’s most recent filings indicate that the Company is working diligently to comply with regulatory requirements from a filing perspective and business is otherwise continuing as usual, at the same time it is difficult to get more insight into the timeline in which this will happen happens The company will comply with its registration obligations again. We continue to view the Hidenburg report and the 10-K filing delay as separate events in their own right, but expect a lack of transparency around the timing of the company’s return to compliance will impact near-term sentiment “Compare with 2017-2020 in terms of results as well as the severity of the financial impact,” said Chatterjee.

Chatterjee errs on the side of caution, adding: “Given our expectation that the shares will have an overhang in the near term due to the uncertainty, we prefer to advise new investors to stay on the sidelines until the company comes back into compliance. “”

To this end, the analyst rates SMCI Neutral, although his $500 price target still suggests a one-year upside of 21%. (To watch Chatterjee’s track record, click here)

So that’s JPMorgan’s view. What is the rest of the street up to? The broader sentiment is somewhat puzzling. On the one hand, the consensus is 3 Buys, 10 Holds and 1 Sell at Hold. But after the stock’s sharp recent decline, analysts are predicting a strong recovery and are expecting a gain of 54.5% in the coming months. (See SMCI stock prediction)

Lam research

The second stock we’ll look at, Lam Research, occupies an important niche in the semiconductor industry, offering advanced machine tools and manufacturing equipment for the production of silicon microchips. Specifically, Lam provides the high-tech tools and equipment used in the production of silicon wafers, the precursor to chips. These wafers are the raw material of all microprocessors, and Lam is known as an innovative supplier of the equipment used for their manufacture and quality control.

Semiconductors are absolutely essential in our digital world, and this fact supports Lam’s overall success. Despite a sharp drop in share price in July, when the company came under pressure from lower industrial spending on memory chips, particularly NAND chips, Lam still has a share price above $800. Industry analysts expect the memory sector to see a rebound in spending next year, a development that will likely benefit Lam as chipmakers ramp up production.

With this in mind, the company’s quarterly results are worth a look. Lam generated revenue of $3.87 billion in the fourth quarter of fiscal 2024, up more than 20% year-over-year and $40 million more than expected. The company’s bottom line, non-GAAP EPS of $8.14, beat forecast by 55 cents per share. And in a sign that the company is healthy enough to weather most headwinds, Lam reported cash inflow from operations of $862.4 million in the fiscal fourth quarter, with a cash and cash equivalent balance of $5.9 billion -Dollar.

We’ll see Lam’s next quarterly results on October 16, two weeks after the company’s upcoming stock split. The split, effective Oct. 2, was approved on a 10-to-1 basis and will reduce the company’s stock price to between $82 and $83 based on current valuation.

Brian Chin, 5-star analyst at Stifel Nicolaus, sums it all up in his review of LRCX stock, writing about the company: “After a down June quarter for NAND and memory, Lam sees gradual improvement in NAND spending, remains optimistic about its position and prospects for Advanced Foundry/GAA and DRAM/TSV investments. Management highlighted several of the company’s technology/product focuses, including cryoetching, and announced an upcoming analyst day on February 25. While we acknowledge that there is some debate surrounding the company/industry, we expect Lam to perform well in the broader WFE environment this year and next, particularly as NAND spending changes.”

Chin thinks this stock is a solid buy and sets a price target of $1,050, suggesting a potential upside of 27% next year. (To view Chin’s track record, click here)

From the stock market as a whole, LCRX stock receives a consensus rating of Moderate Buy based on 19 reviews, including 12 for Buy and 7 for Hold. The stock’s trading price is $816.08, while the average price target of $1,064.50 implies the stock will appreciate 30% in the coming year. (See LCRX Stock Prediction)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.