Stock Split Watch: Is AMD Next?

Advanced Micro Devices (AMD) has been on a remarkable run in recent years, with its stock price soaring and market capitalization reaching new heights. As the company continues to make strides in the semiconductor industry, investors are wondering if a stock split could be on the horizon. In this article, we'll explore the potential impact of a stock split on AMD and the broader market.



What is a stock split, and why do companies do it?

A stock split is a corporate action in which a company divides its existing shares into multiple shares, reducing the price per share while maintaining the same market capitalization. Companies typically split their stocks to make shares more affordable for retail investors and to attract new shareholders. However, a stock split does not change the company's fundamentals or the value of its shares.

AMD's history of stock splits

AMD has a history of stock splits, having executed six splits since its IPO in 1972. The most recent split occurred in 2000, when the company executed a 2-for-1 split, reducing the share price from $68.88 to $34.13. Since then, AMD's stock has rallied roughly 250%, demonstrating that a stock split alone does not guarantee future success.



The case for an AMD stock split

As AMD's stock price continues to rise, some investors may find the current price point intimidating. A stock split could make AMD's shares more accessible to retail investors, potentially increasing trading volume and liquidity. Additionally, a stock split could grant AMD more flexibility in its stock-based compensation plans, allowing the company to issue more shares at a lower price and reduce the dilution effect on existing shareholders.

The case against an AMD stock split

While a stock split could make AMD's shares more affordable, it's essential to remember that the company's fundamentals remain unchanged. A stock split does not alter a company's earnings, revenue, or market capitalization. Instead, it merely adjusts the share price and the number of outstanding shares. Furthermore, AMD's recent performance and growth prospects should be the primary focus for investors, rather than a potential stock split.

Expert opinions on AMD's stock split potential

Analysts and industry experts have mixed opinions on the likelihood of an AMD stock split. Some believe that the company could benefit from a split to make its shares more accessible to retail investors. However, others argue that AMD's fundamentals and long-term strategic goals should take precedence over a stock split.

Leo Sun, an analyst at The Motley Fool, believes that AMD is a great buy at its current prices, regardless of a potential stock split. He notes that the company's recent growth cycle and long-term catalysts make it an attractive investment opportunity. Similarly, John Ballard, another analyst at The Motley Fool, sees AMD as a strong contender in the semiconductor industry, with a favorable risk-reward setup heading into 2025.

Conclusion

In conclusion, a stock split could make AMD's shares more affordable and accessible to retail investors. However, it's essential to remember that a stock split does not change the company's fundamentals or guarantee future success. AMD's recent performance and growth prospects should be the primary focus for investors, rather than a potential stock split. As the company continues to make strides in the semiconductor industry, investors should remain focused on its core business and long-term strategic goals.