Stock-Split Watch: Is ASML Next?

In recent years, stock splits have become quite common in the market, particularly among well-known companies. Most notably, several of the "Magnificent Seven" stocks have taken this step, including high-profile names like Shopify and Walmart.

With this phenomenon occurring, investors are often left wondering which company might be next to split its shares. It's important to note, however, that stock splits do not inherently add value or change the fundamental aspects of a stock. Essentially, a stock split divides existing shares into more pieces, so shareholders still retain the same overall ownership without any increase in their value. Some studies have shown that stocks often perform better following a split, as indicated by research from Bank of America, though the reasons for this are not entirely understood.

This apparent outperformance could stem from companies opting to announce splits during favorable conditions when they expect stock prices to rise. Additionally, investors might view a stock split as a positive sign, interpreting it as a buying opportunity.

One company that is now being considered for a possible stock split is ASML Holdings (ASML -0.65%). The Dutch firm, renowned for manufacturing semiconductor equipment, currently sees its share price exceed $700, positioning it among the highest-priced stocks available today.

So, is a stock split on the horizon for ASML? Historically, the company has executed five stock splits, although the last one took place over a decade ago, with two of those being reverse splits that were associated with other financial strategies.

While ASML's management has not suggested a split may be forthcoming, this lack of communication is not unusual. Companies typically do not disclose plans for a stock split until a conclusive decision has been made. Let's examine the arguments for and against the potential of ASML initiating a stock split.

Reasons Why ASML Might Split Its Stock

Given that ASML's shares currently trade above $700, it indeed seems like a prime candidate for a stock split.

A stock split would decrease the price per share, making it more accessible and appealing to retail investors, as well as to employees interested in purchasing stock.

Moreover, executing a stock split can signify a company's achievements, serving as a reset for the share price and potentially inviting further growth. Investors might also anticipate a split from ASML following similar actions taken by other players in the semiconductor sector, such as Nvidia, Super Micro Computer, and Broadcom.

Lastly, a split might represent management's confidence in the company's trajectory, hinting that they believe the stock price will continue to rise.

Reasons Why a Split is Unlikely

On the flip side, the primary deterrent for an ASML stock split lies in the company's recent performance struggles. The stock has decreased in value this year, contradictory to the upward trends seen in the S&P 500 index. ASML's stock has fallen by 33% from its summer high, sparked by reduced guidance for 2025 and disappointing order figures in the third quarter, indicating weaker demand in the semiconductor equipment sector.

Challenges such as dwindling demand from China, which previously contributed nearly 50% of ASML's revenue this year, further complicate the business outlook. Predictions suggest that this dependence will normalize to around 20% next year.

Moreover, ASML has only just begun to experience year-over-year revenue growth, which underscores the challenges it continues to face.

In light of the prevailing market conditions, initiating a stock split appears unlikely. Management would probably have announced plans for a split when the stock was performing better if they deemed it suitable.

The Outlook for an ASML Stock Split

For investors yearning for an ASML stock split, patience may be required. Given the current stock performance and the various uncertainties surrounding the business, a split seems impractical at this moment.

However, circumstances can change rapidly, particularly if ASML’s stock starts to recover. If it climbs back above $1,000, conversations around a stock split may regain momentum.

Bank of America is an advertising partner of Motley Fool Money. Jeremy Bowman has positions in Bank of America, Broadcom, and Shopify. The Motley Fool has positions in and recommends ASML, Bank of America, Nvidia, Shopify, and Walmart. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

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