Microsoft stock split: MSFT stock price fall may scupper hopes of imminent 10th dilution
Microsoft (MSFT) stock hasn’t fared well so far in 2022, largely owing to the decline in demand for its products as the personal computers (PC) market has experienced a slowdown. The stock’s poor performance this year is also attributed to higher inflation and monetary policy tightening.
During over three decades since going public, the software producer has split its shares 10 times, with almost three decades since the latest stock split.
Is it time for MSFT to follow other tech behemoths, including Alphabet (GOOGL) and Amazon (AMZN), in diluting its shares, or is another Microsoft stock split less likely in the current macroeconomic environment?
What is Microsoft?
Microsoft is a Washington-based technology company and the world’s largest software maker. The company produces a wide range of products and offers services such as cloud computing, computer and gaming hardware, video games, and search engine.
Some of its popular products include Microsoft Windows operating systems, the Microsoft Office suite, and the Internet Explorer web browser.
The company went public on 13 March 1986. Microsoft offered 2.5 million shares at $21 a share – the price hit $35.50 before the end of the first trading session. The company raised $61m in its initial public offering (IPO). Microsoft's fiscal year is from 1 July to 30 June.
What is your sentiment on MSFT?
Microsoft stock analysis: Historical view
Since its IPO in 1986, MSFT stock has produced returns of 75,962%, as of 3 November. The first major bull run was between 1997 and 1999 during the dotcom bubble, when the share price surged over 400% in two years. A crash, however, was imminent with MSFT reversing the gains and adjusting to a more sustainable growth pace.
Over the last five years, the Microsoft stock price has risen 162%, as of 3 November, 2022, outperforming the Dow Jones (US30), S&P 500 (US500) and the tech-laden US Tech 100 (US100).
The tech giant’s share price accelerated in 2020, when working-from-home boosted demand for Microsoft’s products. The stock surged 100% between March lows and the record high of $349.67 intraday, achieved on 20 November.
Microsoft stock declines on lower demand
It’s been a different story this year as investor sentiment has shifted towards risk-off amid fear of recession, aggressive monetary tightening to combat four-decade high inflation and Russia’s invasion of Ukraine. MSFT stock has fallen 31% year-to-date and 37% since the record high.
Furthermore, the falling PC demand hit the tech giant along with other component makers including Advanced Micro Devices (AMD) and Nvidia (NVDA). Credit risk and research agency CreditSights noted:
According to tech research company Gartner, PC shipments declined 19.5% to 68 million units in the third quarter of 2022 on an annual basis. Mikako Kitagawa, director analyst at Gartner, said:
Microsoft’s latest earnings report showed that the company's net income decreased 14% to $17.56bn in the three months ended 30 September, from $20.51bn a year earlier. The decline came as consumers spent more time outdoors rather than at home.
Microsoft stock split history since IPO
In almost four decades since its listing, Microsoft has split its stock nine times, the last one carried out almost twenty years ago, on 14 February 2003. Out of the nine stock splits in Microsoft split history, seven were 2-for-1 and two were 3-for-2.
2:1 stock split on 18 September 1987
2:1 stock split on 12 April 1990
3:2 stock split on 12 June 1992
2:1 stock split on 20 May 1994
2:1 stock split on 6 December 1996
2:1 stock split on 20 February 1998
2:1 stock split on 26 March 1999
2:1 stock split on 14 February 2003
A stock split is when a company raises the number of its shares while reducing the price of an individual share. The action essentially does not affect the company’s market capitalisation, but the lower price can result in higher liquidity and raise investor enthusiasm. A split is typically carried out to make the stock more affordable to investors.
For example, if a company's shares are valued at $100 and an investor has 100 shares, their total investment is worth $10,000. If the company then splits its stock by two, known as a 2-for-1 stock split, the investor will own 200 shares worth $50 each. The value of the investor’s holding will be unchanged.
MSFT stock split prediction doesn’t materialise
In 2022 alone, major US companies, including Amazon, Tesla (TSLA) and Google-parent firm Alphabet, carried massive stock splits in an attempt to make their shares more attractive for investors. Amazon and Alphabet, for example, split their stocks 20 for 1, meaning the shares became 20 times more affordable.
This prompted some commentators to speculate that a MSFT stock split is likely in 2022, a bet that didn’t materialise as late as November.
Taking into account the company’s stock performance, Violeta Todorova, senior research analyst at Leverage Shares, noted:
Final thoughts
Will Microsoft split its stock in the near future? We do not know. The share price is troubled amid a bearish market environment. A Microsoft stock split decision would be carried out by the firm’s executive team.
Note that analysts can be wrong. Their forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading, looking at the latest news, a wide range of analyst commentary, technical and fundamental analysis on the stock. Keep in mind that past performance does not guarantee future returns. And never trade money that you cannot afford to lose.
FAQs
When was the last time Microsoft stock split?
The last Microsoft stock split was carried out on 14 February, 2003. The 2 for 1 split led to a closing price of $24.96.
How many times has Microsoft stock split?
To date, Microsoft stock has undergone nine stock splits.
Will Microsoft stock split again?
Although some investors expected a Microsoft stock split in 2022, the company has not announced one.
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