Many big tech companies split their stocks over the past few years. Those events generated a lot of buzz and reduced their trading prices, but they didn't make the stocks fundamentally cheaper because they merely split a single share into smaller slices. Fractional trading makes stock splits even less meaningful.
That said, stock splits still make it easier for smaller investors to buy round lots (100 shares). They also make their underlying options cheaper, since each contract is tethered to a round lot, while giving companies more flexibility in paying their stock-based compensation plans.
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So unless you're an options trader or a company employee, stock splits generally aren't too important. That said, we should still keep track of which stocks have soared so high that they're primed for a split.
Here are three high-flying tech stocks that fit this description and might head even higher over the next few years: CrowdStrike Holdings (NASDAQ: CRWD), MongoDB(NASDAQ: MDB), and ASML Holding(NASDAQ: ASML).
1. CrowdStrike
CrowdStrike, a leader in cloud-native cybersecurity services, went public at $34 in 2019. It now trades at about $300 but has still never split its stock. That sets it apart from its big cybersecurity competitors, Palo Alto Networks and Fortinet, which both split their stocks in 2022.
Unlike many of its peers, which still install their services through on-site appliances, CrowdStrike only provides its services through a cloud-native platform called Falcon. That approach is cheaper, stickier, and easier to scale up as an organization expands. That disruptive approach is winning over a lot of companies.
From fiscal 2019 to 2024 (ended this past January), CrowdStrike's revenue had a compound annual growth rate (CAGR) of 65%. It also turned profitable on the basis of generally accepted accounting principles (GAAP) in 2024. From fiscal 2024 to 2027, analysts expect its revenue and GAAP earnings per share (EPS) to have a CAGR of 24% and 73%, respectively, as it gains more customers and sells more modules.
CrowdStrike's business is maturing, but it suffered a major setback after it triggered a global IT outage this July. Still, it will likely remain the dominant name in its niche market. Its stock isn't cheap at 72 times its forward adjusted earnings, but its robust growth and wide moat should support its premium valuation.
2. MongoDB
Another high-growth tech company that has never split its stock is MongoDB, a provider of database management software that went public at $24 in 2017. It has soared more than 11-fold to about $270 over the past seven years.
MongoDB's platform helps companies store their unstructured data in a non-relational database, which sets it apart from older relational databases, which store their data in rigid structured tables and rows. Its non-relational databases can be more easily scaled up and customized for specific tasks than relational databases can. Its cloud-based Atlas platform also helps its clients analyze all of that data.
From fiscal 2018 to 2024 (which ended in January), revenue had a CAGR of 40%. It isn't profitable on a GAAP basis yet, but it's narrowing its operating losses on an adjusted basis. From fiscal 2024 to 2027, analysts expect its revenue to have a CAGR of 18%.
MongoDB faces some near-term macro headwinds, and it's relying more on Atlas to offset the slower growth of its older services. But its stock still looks reasonably valued at nine times next year's sales, and its growth could accelerate again as companies crunch more data for new generative AI applications.
3. ASML
ASML, the world's top producer of lithography systems for manufacturing semiconductors, has split its stock four times since its initial public offering in 1995. It executed 2-for-1 splits in 1997 and 1998, a 3-for-1 split in 2000, and an 8-for-9 reverse split to optimize its capital structure in 2007.
But the Dutch company hasn't split its stock again since then -- even though its price has risen about 1,400% to $675 per share over the past 17 years.
ASML's lithography systems are used to optically etch circuit patterns onto silicon wafers. It's the leading producer of lower-end systems for older chips, as well as the only producer of high-end extreme ultraviolet (EUV) systems for manufacturing the world's smallest, densest, and most power-efficient chips. All of the world's top foundries -- including Taiwan Semiconductor Manufacturing, Samsung, and Intel -- use its systems.
From 2018 to 2023, ASML's revenue had a CAGR of 20% as its EPS had a CAGR of 27% (in euro terms). That growth was driven by the heated "process race" among the world's top foundries to produce the world's most advanced chips for the PC, mobile, cloud, and AI markets.
From 2023 to 2026, revenue and EPS are expected to reach a CAGR of 11% and 15%, respectively. Near-term growth could be throttled by the macro headwinds for the semiconductor sector and the export curbs on its shipments to China, but ASML should remain the bellwether and linchpin of the growing semiconductor market for the foreseeable future. Its stock also looks historically cheap at 26 times next year's earnings.
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Leo Sun has positions in ASML. The Motley Fool has positions in and recommends ASML, CrowdStrike, Fortinet, MongoDB, Palo Alto Networks, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: short November 2024 $24 calls on Intel. The Motley Fool has a disclosure policy.
