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Time to Buy the Potential Stock-Split Stock?
The world is awash in semiconductors. Companies are spending tens of billions of dollars to build new computer chips for the artificial intelligence (AI) boom. It is no surprise, then, that one of the leading equipment makers for semiconductors, ASML (NASDAQ: ASML), was up 40% year to date at one point recently.
As of this writing, the company has given up all of these gains. Even though the narrative was for insatiable demand for semiconductors in 2024, ASML posted slowing orders in the third quarter due to struggles in every other segment outside of AI.
The stock is now down 36% from all-time highs set earlier this year, and yet it still trades at close to $700 a share, making it a potential stock-split candidate within the next few years.
Is it time to buy the dip on ASML with shares trading on the cheap?
Slowing orders, but demand for AI tools
ASML sells advanced lithography machines that semiconductor manufacturers use. With its cutting-edge technology, the company is the only one in the world that has extreme ultraviolet lithography (EUV) technology, making it the sole source for manufacturers looking to make the most advanced semiconductors. With no ASML machines, there would be no ultra-advanced AI chips from Nvidia.
The AI spending boom led investors to believe that orders for ASML would skyrocket, but that did not happen in the third quarter. Even though management said that spending for AI remains elevated, the Netherlands-based company only booked 2.6 billion euros ($2.8 billion) of orders committed to by customers in the period compared to more than 5 billion euros ($5.4 billion) of backlog a year ago.
Revenue (not backlog) grew to around $8.1 billion in the third quarter. ASML has a sizable backlog, so any orders placed today won’t be converted into revenue for at least a year, if not longer. But it can be a good barometer for what revenue growth could look like over the next few years.
In 2024, ASML is now guiding for $38.4 billion in revenue. In 2025, it expects between $32.5 billion and $38 billion, which is at the lower end of its previous long-term projection. Given this downgrade in guidance, it is no surprise that the stock plummeted after the recent earnings report.
Focus on long-term projections
The semiconductor equipment market is cyclical. ASML is going through a down cycle right now in every other segment besides AI. This is why orders are low and projections for 2025 revenue growth have come down.
This doesn’t mean the semiconductor market is done growing over the long term. Through 2030, ASML expects spending to rise by an average of 9% per year. With this increase in sales, the company should grow revenue at a double-digit rate through the end of the decade.
If revenue grows 10% annually to 2030, the company will be generating around $54.2 billion in sales a year by 2030.
What will that equate to in profits? In the last few years, ASML has maintained an operating margin of around 30%, which I think it can maintain in the future. This would mean $16.3 billion in operating earnings in 2030, a multiple of 17 versus its current market cap of $271 billion.
For such a high-quality company, this looks cheap but is not an extreme bargain. I think the stock will do well over the next five years if these projections are met.
Buy it for dividend growth?
ASML’s stock can appreciate over the next five years for patient shareholders. And unlike other hypergrowth and cutting-edge technology companies, it can also provide dividend payments to fuel total returns.
The stock’s dividend has grown by 710% in the last 10 years. The current yield is quite low at below 1%, but there is a lot of room to expand if the dividend keeps growing. Management said it wants to grow the dividend and keep repurchasing stock, which will help raise the payout. ASML’s shares outstanding have fallen by around 10% in the last 10 years.
With the dividend income and the chance for more price appreciation, ASML looks like a fine stock to buy at these prices. And with its price approaching $1,000 a share, it is a likely candidate for a stock split in the next few years.
Should you invest $1,000 in ASML right now?
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Nvidia. The Motley Fool has a disclosure policy.
ASML Stock Keeps Falling: Time to Buy the Potential Stock-Split Stock? was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
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Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
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Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
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Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
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Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
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Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
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Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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This article Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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Bitcoin’s private keys won’t be breached any time soon, but the industry still needs to transition to “post-quantum cryptography.”
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