There’s evidence that stock-split stocks tend to outperform the broader market.
The popularity of stock splits has seen a resurgence in recent years. While the procedure was common throughout the 1990s, it had faded into near obscurity before enjoying a renaissance over the past decade. Companies will normally embark on a stock split after years of strong operational and financial results have driven a surging stock price. The prospect of a stock split is generally a reason for investors to take a fresh look at the company in question — and with good reason.
The strong business performance that ultimately led to the stock split in the first place tends to continue, fueling further gains. Research shows that companies that initiated a stock split normally return 25%, on average, in the year following the announcement, compared with average increases of 12% for the S&P 500, according to data compiled by Bank of America analyst Jared Woodard.
Here are three stock-split stocks that still have a long runway ahead, according to select Wall Street analysts.
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Nvidia: Implied upside 82%
The first stock-split stock with loads of upside potential is Nvidia (NVDA -1.59%). The company has become the de facto flag bearer for recent advances in artificial intelligence (AI) thanks to its pioneering work with graphics processing units (GPUs).
It turns out that the same chips that revolutionized the gaming industry work equally well at speeding data through the ether, making them the first choice among cloud-computing and data-center operators. It also accelerates the processing of AI models, which helped Nvidia become the gold standard for generative AI.
For its fiscal 2025 second quarter (ended July 28), Nvidia generated record-quarterly revenue that soared 122% year over year to $30 billion, delivering diluted earnings per share (EPS) that surged 168% to $0.67. The headliner was a blockbuster performance from the company’s data-center segment — which includes AI chips — as sales soared to $26.3 billion, rising 154%.
The rise of AI has fueled a blistering increase in Nvidia’s stock price, which has gained 716% since the start of 2023 and led to its viral 10-for-1 stock split in June. The stock has experienced a lull in recent months as investors questioned the staying power of one of the market’s best performers, but many on Wall Street believe the adoption of AI is just getting started, a trend that favors Nvidia.
In an interview on CNBC earlier this month, Niles Investment Management founder Dan Niles said he “firmly believes” that over the next several years, Nvidia’s revenue and stock price will double from current levels, driven higher by demand for AI. That suggests potential gains for investors of 82% compared to Wednesday’s closing price.
He isn’t the only one who believes the future is bright. Of the 60 analysts who covered the stock in August, 55 rated the stock a buy or strong buy, and none recommended selling.
I’ve made no secret about my bullish take on Nvidia, predicting that the stock will top $200 by 2026 — and I stand by that prediction.
Nvidia stock is currently selling for 39 times forward sales. While that might seem lofty at first glance, consider this: Wall Street expects the company’s profits to increase by 53%, on average, over the coming five years, showing that Nvidia stock is deserving of a premium.
Sirius XM Holdings: Implied upside of 179%
The second stock split with significant potential upside is Sirius XM Holdings (SIRI 3.87%). The company is without equal when it comes to satellite radio services in North America. Sirius has 34 million paying subscribers, and its audience increases to 150 million including its ad-supported Pandora music-streaming service, so its listener base is unrivaled.
The high levels of inflation that marked the past couple of years forced people to make tough choices with their disposable income, and some chose not to renew their Sirius subscription. This, combined with investors’ fundamental misunderstanding of its recent merger and the resulting reverse-stock split, has helped push the stock down 56% so far this year. While the results were weak, the stock-price decline is clearly an overreaction.
In Q2, Sirius’ revenue slipped 3% year over year to $2.18 billion, while EPS of $0.08 was flat. While paid subscribers declined by 100,000 (or roughly 1.5%), this was an improvement, as its churn rate continues to slow ahead of an expected turnaround.
Despite the weakness in the stock price, some on Wall Street believe the selling was overdone. Benchmark analyst Matthew Harrigan is one such analyst. He maintains a buy rating on Sirius XM, with a split-adjusted price target of $65. That represents potential upside of 179% compared to Wednesday’s closing price. The analyst cites a “market dislocation” due to its recent merger with tracking stock Liberty Sirius XM. He further believes management’s “strategic initiatives” will bear fruit.
Additionally, the declining stock price presents savvy investors with a compelling valuation. Sirius XM is currently selling for roughly 7 times earnings, which factors in little-to-no future growth.
I think the analyst’s opinion is spot on, as the improving macroeconomic situation should reignite Sirius XM’s growth, which will likely send the stock higher.
Super Micro Computer: Implied upside 243%
The final company in our trio of stock-split stocks with room to run is Super Micro Computer (SMCI 4.59%), commonly called Supermicro. The company has been designing custom servers for more than 30 years, and the accelerating adoption of AI has taken demand to the next level.
The secret of the company’s success is the building-block architecture of Supermicro’s rack-scale servers. This allows customers to design a system that meets their specific needs. Additionally, the company is the dominant provider of servers featuring direct-liquid cooling (DLC), which has become almost table stakes in the era of AI-focused data centers. CEO Charles Liang suggests Supermicro’s DLC market share is currently between 70% and 80%.
In the company’s fiscal 2024 Q4 (ended June 30), Supermicro reported record revenue that surged 143% year over year to $5.3 billion, which also increased 38% sequentially. The resulting adjusted EPS jumped 78% to $6.25.
Investors sold off the stock in the wake of the report, as concerns about the company’s declining-profit margin sparked a knee-jerk reaction. Liang said a change in product mix caused by component bottlenecks was to blame, a situation which should be rectified shortly.
Supermicro’s track record of strong results has pushed its stock price up 432% since strong demand for AI-centric systems kicked off in early 2023. This caused the company to initiate a 10-for-1 stock split early last month.
Loop Capital analyst Ananda Baruah maintains a buy rating on the stock and a Street-high price target of $1,500. That represents potential upside of 243% compared to Wednesday’s closing price.
The analyst is bullish on Supermicro’s place within the AI server market, citing its leadership when it comes to scale and complexity. He calculates the company’s sales will accelerate to a run rate of $40 billion by the end of fiscal 2026, expanding on management’s guidance for revenue of $28 billion in fiscal 2025.
I think the analyst hit the nail on the head, as Supermicro continues to gain market share at the expense of its rivals.
Many on Wall Street concur. Of the 18 analysts who offered an opinion in August, nine rated the stock a buy or strong buy, and none recommended selling.
Furthermore, at 22 times earnings and less than two times sales, Supermicro is the very definition of an attractively priced stock.