Should you buy a Super Micro Computer before the upcoming stock split? Here’s what history says.

Super Micro Computer (NASDAQ: SMCI)one of Nasdaq’s top performers this year, offers investors a golden opportunity. High-flying stocks that have even outperformed the first half of the bull market Nvidiashares its stock in a few weeks. The idea is to lower the price per share, making the stock more accessible to a wider range of investors.

This tech giant has grown over the past five years, advancing more than 2,200%, as it has become the go-to for artificial intelligence (AI) clients. Companies focused on artificial intelligence have placed orders for Supermicro equipment such as servers and full-scale solutions for their data centers. And that helped 30-year-old Supermicro report higher revenue last quarter than it reported for the entire fiscal year 2022. The momentum continues, with the company forecasting revenue growth of up to 230% next quarter.

With all of this in mind, Supermicro makes an excellent addition to any growth portfolio. But now the question is should you buy the stock before the next split or wait? Let’s take a look at what history says.

The details of the Supermicro share split

First, a bit about stock splits in general and the details of how Supermicro works. Stock splits involve issuing additional shares to current holders to reduce the price of each individual share. They do not change the total market value of the company or the total value of an investor’s holding. And it doesn’t change anything fundamental about a particular company so investors don’t go out and buy stock just because launch a split.

But there is something positive about a breakup. These operations make it easier for smaller investors to get into stocks at previously high prices without resorting to fractional shares. Fractional shares are often a good option, but not every brokerage offers them. So a lower share price opens the door for all investors.

Supermicro has announced a 10-for-1 stock split, meaning that for every share you own, you’ll get nine additional shares. Given the current price of about $430, the post-split price will be about $43 per share. Shares will begin trading at the split-adjusted price on October 1.

Although Supermicro has been a top performer in recent years and even in the first half of this year, it has had a rough few months. The stock is down more than 60% from its peak earlier this year. Investors frowned at the decline in gross margin and earnings per share, which missed analysts’ expectations in the most recently reported quarter, delivered in early August.

The story continues

Bad news for Supermicro

In addition to this, two other pieces of news hit the stock market later in the month: Hindenburg Research released a short report citing problems at Supermicro and, separately, Supermicro announced that it would be late filing its annual 10-K report. So the stock has lost its positive momentum over the past few weeks, but I think these are short-term issues and won’t change the company’s long-term growth story.

Now, before we decide whether to buy Supermicro pre- or post-breakup, let’s look at what history tells us. From 1980 to today, stocks that split have delivered an average total return in the 12 months since the announcement of more than twice the return of the S&P 500 — 25.4% versus 11.9% for the index. This is according to Statista, based on Bank of AmericaData from the Research Investment Committee.

If Supermicro follows this pattern, there could be more earnings for this tech stock, and that means you could benefit by buying the stock now, before the split.

Two points to note

That said, it’s important to keep a few things in mind. First, history gives us a general idea of ​​what might happen — but nothing is guaranteed. Stocks and the market itself could surprise us at any moment. Second, recent news weighing on Supermicro could continue to weigh on the stock’s performance in the coming weeks. It may take Supermicro’s 10-K filing and even an additional earnings report to help the stock regain positive momentum.

So what should investors do? It’s time to look at the assessment. Now is a great time to buy Supermicro, as you can get in on a great long-term growth story for a song — shares trade for just 12x forward earnings estimates. If Supermicro follows historical patterns, it could boost your portfolio next year, but even if it doesn’t, you still have a solid chance to win with this company that has what it takes to deliver earnings and performance growth long-term stocks. .

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Adria Cimino has no position in any of the actions mentioned. The Motley Fool has positions in and recommends Bank of America and Nvidia. The Motley Fool has a disclosure policy.

Should you buy a Super Micro Computer before the upcoming stock split? Here’s what history says. was originally published by The Motley Fool