Stock-Split Stocks: Buy Sirius XM, Avoid Super Micro

As we head into March, investors are keeping a close eye on companies announcing stock splits. While some splits can signal a strong outlook, others may indicate underlying issues. Let's take a look at two stocks that have recently split and determine which one is worth buying and which one should be avoided.

Sirius XM Holdings (SIRI) recently completed a reverse stock split, which can sometimes raise red flags. However, this split was not a result of operating weakness but rather a strategic move to attract institutional money managers. Sirius XM's shares were in no danger of being delisted from the Nasdaq stock exchange, and the reverse split was designed to increase its share price and make it more appealing to institutional investors.

Sirius XM's competitive advantages, such as its legal monopoly status as the only licensed satellite-radio operator and its predictable expense structure, contribute to its long-term growth potential. The company's revenue breakdown, with a focus on subscriptions, provides a more stable cash flow compared to traditional radio operators. Sirius XM's undervalued stock, with a forward-year price-to-earnings (P/E) ratio of 7.6 representing a 49% discount to its average forward P/E multiple over the last half-decade, presents an attractive investment opportunity.



On the other hand, Super Micro Computer (SMCI) completed a forward stock split, which typically signals a strong outlook. However, not every company completing a forward stock split is worth buying. Supermicro's recent stock split may not be indicative of a strong outlook, as the company's shares have been volatile in recent months.

Supermicro's stock price has fluctuated significantly, and the company's financial performance has been inconsistent. While the forward stock split may attract some investors, the company's recent history of volatility and inconsistent financial performance makes it a less attractive investment opportunity compared to Sirius XM.

In conclusion, while both Sirius XM Holdings and Super Micro Computer have recently split their stocks, Sirius XM's strategic reverse split, competitive advantages, and undervalued stock make it an attractive investment opportunity in March. On the other hand, Supermicro's forward stock split, recent volatility, and inconsistent financial performance make it a stock to avoid. As always, it's essential to conduct thorough research and consider your risk tolerance before making any investment decisions.