One of the most interesting developments for investors in recent years is the resurgence in popularity of stock splits. While this practice was common in the late 1990s, it fell out of favor, but has been enjoying a resurgence in popularity in recent years. This corporate action is typically undertaken in response to years of strong operational and financial results, which ultimately lead to a rising stock price.

Experience shows that successful companies tend to continue to run at full speed. Companies that perform stock splits achieve average share price increases of 25% in the year following the announcement, compared to average gains of 12% for the S&P500according to Bank of America Analyst Jared Woodard.

Here are three stocks from stock splits that some Wall Street analysts say still have room to move higher.

Broadcom: Implied upside potential 76%

The first stock split stock with great growth potential is Broadcom (NASDAQ:AVGO)The company holds an enviable position in technology circles, offering a wide range of software, semiconductor and security offerings for the cable, broadband, wireless and data center markets. Broadcom says that “99% of all Internet traffic runs on some type of Broadcom technology,” giving it a crucial position in the ongoing artificial intelligence (AI) revolution.

Recent results show that business is booming. In the second quarter, revenue of $12.5 billion increased 43% year over year, resulting in adjusted earnings per share (EPS) of $10.96, up 6%. It’s worth noting that the recent acquisition of VMWare is weighing on the company’s profit margin, which management expects to normalize by 2025. The company expects its strong growth to continue, raising its full-year revenue forecast to $51 billion, which would represent 42% growth.

The success story and robust growth led to Broadcom’s 10-for-1 stock split in mid-July. Despite share price gains of 152% since the beginning of last year, many on Wall Street remain incredibly optimistic. Shortly before the split last month, Rosenblatt analyst Hans Mosesmann reiterated his buy rating and raised his price target to split-adjusted $240, giving investors a potential upside of 76% from Wednesday’s closing price.

The analyst believes that the accelerated adoption of generative AI will lead to higher sales of AI-related hardware, including application-specific integrated circuits (ASICs), networking and switch chips. He also expects the integration of VMWare to make a significant contribution.

The story continues

He is not alone in his optimistic assessment of Broadcom. Of the 38 analysts who gave an opinion on the stock in July, 33 rated the stock as a buy or strong buy, and none recommended sale.

Nvidia: Implied upside potential 99%

The second stock with a lot of potential from a stock split is NVIDIA (NASDAQ: NVDA). The company is the leading supplier of graphics processing units (GPUs) used in video games, cloud computing, and data center operations. This allowed Nvidia to quickly dominate the market for generative AI chips, boosting the company’s revenue as these GPUs provide the computing power needed for AI.

In the first quarter of fiscal 2025 (which ended April 28), Nvidia generated record revenue of $26 billion, up a whopping 262% year over year. This resulted in diluted earnings per share of $5.98, up 629%. The results were driven by the data center segment, which includes AI processors. Revenue from this segment rose 427% to $22.6 billion.

Nvidia’s blockbuster results have pushed the stock price up 600% since the start of 2023, leading to a spectacular 10-for-1 stock split in June. But some on Wall Street believe there’s much more to come. Mosesmann recommends Nvidia as a buy and has a $200 price target, representing a potential upside of 99% from Wednesday’s closing price.

The analyst believes many of his colleagues fail to understand the importance of the software built into Nvidia’s AI processors, which gives the company a serious competitive advantage. “We expect this software aspect to grow significantly in terms of the overall sales mix over the next decade, with valuation trending upward due to sustainability,” Mosesmann wrote in a note to clients.

He is not the only one who believes there is much more to come. Of the 58 analysts covering the stock in June, 53 rated the stock a buy or strong buy, and none recommended sale.

Super Microcomputer: implied upside potential 204%

The last of our three stock split stocks with a lot of potential is Super-microcomputer (NASDAQ:SMCI)also known as Supermicro. The company has been supplying the technology industry with customized servers for more than 30 years. Supermicro’s building block approach to rack-scale servers with direct liquid cooling technology is perfectly tailored to the demanding requirements of AI processing, as is the company’s legendary focus on energy efficiency.

Supermicro has built close relationships with all major chip manufacturers and can thus secure the most sought-after processors, including those from Nvidia, Advanced micro devicesAnd Intel.

In the fourth quarter of fiscal 2024 (ended June 30), Supermicro reported record revenue of $5.3 billion, up 143% year over year and 38% quarter over quarter, resulting in adjusted earnings per share (EPS) of $6.25, up 78%.

While some investors were concerned about the company’s falling profit margin, CEO Charles Liang pointed to a shortage of some server components that pushed some business into the next quarter. This, in turn, changed the product mix to include more lower-margin sales. He expects a recovery in the coming quarters.

Supermicro’s solid results since the beginning of last year have led to share price gains of 516%, prompting the company to announce a 10-for-1 stock split just this week. Some on Wall Street believe this is just the beginning. Loop Capital analyst Ananda Baruah recommends the shares as a buy, setting a price target of $1,500, representing a potential upside of 204% from Wednesday’s closing price.

The analyst believes investors continue to underestimate Supermicro’s revenue potential and expects the company to generate revenue of $40 billion in fiscal 2026, compared to less than $15 billion at the end of fiscal 2024. Management expects a similar trend and is targeting net revenue of around $28 billion in fiscal 2025, at the midpoint of its guidance.

Wall Street seems to agree. Of the 17 analysts who gave their opinion in July, 12 rated the stock as a buy or strong buy, and none recommended sale.

A note on the evaluation

Each of these split stocks still has a long track record ahead of them, but despite their prospects, they remain attractively valued. Nvidia, Broadcom, and Supermicro currently trade at 36, 29, and 14 times forward earnings, respectively, compared to a price-to-earnings (P/E) ratio of 27 for the S&P 500. While two of the three stocks are trading at a slight premium to the overall market, their track records and performance, rapid price gains, and solid future potential make them worth every penny.

Should you invest $1,000 in Broadcom now?

Before you buy Broadcom stock, consider the following:

The Motley Fool Stock Advisor The analyst team has just published what they believe to be The 10 best stocks for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could deliver huge returns in the years to come.

Consider when NVIDIA created this list on April 15, 2005… if you had invested $1,000 at the time of our recommendation, You would have $641,864!*

Stock Advisor offers investors an easy-to-understand plan for success, including instructions on how to build a portfolio, regular updates from analysts, and two new stock recommendations per month. The Stock Advisor Service has more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns as of August 6, 2024

Bank of America is a promotional partner of The Ascent, a Motley Fool company. Danny Vena holds positions in Nvidia and Super Micro Computer. The Motley Fool holds positions in and recommends Advanced Micro Devices, Bank of America, and Nvidia. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.

3 Stock Split Stocks to Buy Now Before They Rise as Much as 204%, According to Select Wall Street Analysts, was originally published by The Motley Fool.