Stock-Split Watch: Is ASML Next?

Stock splits have swept the market in recent years as nearly every "Magnificent Seven" stock has split its shares, as well as a number of other high-profile stocks like Shopify and Walmart.

Investors often speculate about what could be the next stock to split its shares. Stock splits don't add value or change the fundamentals of a stock. They essentially divide the stock pie into more pieces, meaning individual shareholders still own the same stake they did before. There is some evidence that stocks tend to outperform after a stock split, according to research from Bank of America, though it's not fully clear why.

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This could be because companies can choose the timing of their stock splits and generally choose to do them from a position of strength when they expect the stock to keep climbing. It could also be because investors tend to respond positively to a stock split, seeing it as a signal to buy the stock.

One stock that could be next up to split its shares is ASML Holdings (NASDAQ: ASML). The Dutch maker of semiconductor manufacturing equipment now trades for more than $700 a share, making it one of the highest-priced stocks on a per-share basis on the market.

So will ASML split its stock? The company has had five splits in its history, though none in the last 10 years, and two of those were reverse splits tied to a special dividend and a synthetic buyback.

Management hasn't given any indication that it's considering a stock split, but that's not unusual. Companies usually don't discuss it until a decision has been made. Let's take a look at the case for and against an ASML stock split.

Image source: Getty Images.

Why ASML could split its stock

Given its share price above $700, ASML certainly looks like a good candidate for a stock split.

A stock split would make the share price lower, which tends to make it more appealing to retail investors and even employees who want to buy the stock.

Splitting the stock can also act as a milestone for a company's growth as it effectively resets the share price for more growth, and investors may be expecting ASML to split its stock after so many of its peers in the semiconductor industry have done so, including Nvidia, Super Micro Computer, and Broadcom.

Finally, a stock split also acts as a sign of confidence from management, indicating that it expects the stock to keep moving higher.

Why a split is unlikely

The biggest reason why ASML is more likely to wait to split its stock is because the company has struggled lately. The stock is down year to date even as the S&P 500 index has soared this year, and the business has also faced challenges.

The stock is currently down 33% from its peak this summer as the company cut its guidance for 2025, and it also reported weak bookings in the third quarter, a sign that demand is slower than expected due to a range of headwinds in the semiconductor equipment industry. That includes slowing demand from China, which had made up nearly half of its revenue this year, though that's expected to normalize to a rate of around 20% next year.

ASML only recently returned to year-over-year revenue growth, which is another sign of the challenges facing the company.

Given the weakness in the stock, a split seems unlikely -- the stock is down significantly, and management would have announced a split when the stock was higher if it thought one was warranted.

Will ASML do a stock split?

Investors hoping for an ASML stock split will likely have to be patient. With the stock well off its peak from the summer and other questions about the business weighing on its performance, a stock split wouldn't make sense right now.

However, that dynamic can change quickly, especially if the stock starts to rebound. If ASML shares can top $1,000 again, don't be surprised to hear chatter about a stock split picking up steam again.

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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.