Key Points
- Shares of Micron Technology have soared over the past year, and the company's earnings growth remains solid.
- The robust demand for memory chips and the ongoing supply shortage will continue to support Micron's outstanding growth.
- Micron stock remains worth buying regardless of a stock split due to its phenomenal growth and cheap valuation.
Micron Technology ( MU 5.68%) stock has been in roaring form over the past year, gaining an astounding 698% as of this writing.
This stunning surge has brought Micron's stock price to nearly $1,000. Investors, therefore, may be wondering whether this high-flying artificial intelligence (AI) stock will undergo another forward stock split. After all, Micron has a history of executing stock splits, and management may now want the stock to become accessible to a wider pool of investors following its impressive rally over the past year.
Let's try to find out if the chipmaker is indeed going for a stock split.
Image source: Micron Technology.
The time is ripe for Micron's stock split
A stock split happens when a company multiplies or divides its outstanding share count while keeping the overall market capitalization unchanged. A forward stock split is the most common type of stock split, in which a company increases its outstanding share count and lowers the price per share to keep the market cap constant.
The last time Micron executed a forward stock split was in the year 2000. It split its stock twice before that, once in 1994 and again in 1995. All these have been forward stock splits, suggesting that Micron has increased its outstanding share count. While a stock split does nothing to change a company's fundamentals and prospects, as it is simply a cosmetic move, there is a belief that doing so increases the demand for a stock among retail investors.
As Micron is trading at almost $1,000, a stock split could significantly reduce the price of each share and make the stock more desirable among smaller investors. Nvidia, for instance, announced a 10-for-1 forward split in June 2024 following an AI-fueled rally that sent its stock price to $1,200. Nvidia stock has jumped by 60% since it started trading on a split-adjusted basis just over two years ago.
So, a stock split could indeed be a tailwind for Micron stock by increasing its appeal among retail investors, especially given that it trades at an attractive valuation and is growing at a phenomenal pace.
The stock is a buy irrespective of a split
Many brokerages allow investors to buy fractional shares, so they can still buy Micron despite its high stock price. So, if your brokerage offers the option to buy fractional shares, you can consider investing your cash in Micron right away.
After all, the stock trades at an extremely attractive 23 times earnings right now, a discount to the tech-laden Nasdaq-100 index's earnings multiple of 35. Micron's forward earnings multiple of just 7 is even more attractive compared to the index's multiple of 27. Buying Micron at this valuation is a no-brainer, given its astronomical growth.
The company's earnings per share grew by just over 1,200% year over year in the third quarter of fiscal 2026 to $25.11. Micron's guidance of $31.00 in earnings per share for the current quarter points to a year-over-year jump of just over 10x. Management noted on the latest earnings call that the memory supply shortage is going to last beyond 2027. Given that memory demand will continue thriving in the future, the favorable pricing environment fueling Micron's phenomenal earnings growth is here to stay.
So, Micron stock remains a screaming buy even after its red-hot rally over the past year, regardless of a stock split, as its incredibly cheap valuation and phenomenal growth point to further gains.
