How Should Investors Trade TSLA & AAPL Stock Splits? Can Investors Expect More Stock Splits In The Future?
Tech stocks have been pushing the stock market to record highs this year. Just the U.S. tech sector alone has now become more valuable than the entire European stock market for the first time in history. This could be an exciting week around two of the market’s favorite stocks, Apple (AAPL Stock Report) and Tesla (TSLA Stock Report). The world’s largest tech company begins trading after a 4-for-1 split at $125.5 per share. Meanwhile, the largest EV company starts trading on a 5-for-1 stock split at $443.4 per share.
Now that both Apple and Tesla have pulled the trigger, some investors are expecting other expensive blue-chip stocks to follow suit. After all, many retail investors are nonetheless still prone to judging how “expensive” stock is based on its dollar value.
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What Is A Stock Split & How Does It Affect Your Investments?
Most stock splits come after protracted periods of strong performance. Now, the market caps of the companies will remain the same. But some are saying the moves will make shares more accessible to a broader base of investors. And therefore it could be a new catalyst for retail investors.
For sure, from a theoretical standpoint, it shouldn’t matter when you buy Apple or Tesla stocks in relation to a stock split. The split itself has no intrinsic impact on the company whatsoever. After the split, investors typically will still own the “same value” of shares. But expect volatility when we enter the new week with both high profile tech stocks splitting their stocks.
If you are a true believer of what the company can bring to the table in the long run, it will be insignificant whether you pay a dollar more or less today. However, if you are looking for a quick flip in these shares, you might want to tread carefully. Reports said Apple’s CEO Tim Cook sold some shares ahead of the stock split. Does that signal that the iPhone maker’s valuation is a bit off the roof at the moment? You be the judge.
Here’s What Analysts Are Saying About AAPL & TSLA Stocks?
Historically, AAPL has seen on average a 10.4% increase 12 months after its stock splits. But a couple of factors could hint at stronger than average gains for Apple shares this time around.
As Katy Huberty from Morgan Stanley puts it; Nevertheless, we don’t believe the stock split will be a “sell the news” type of event among institutional investors given the increasing expectations for the fall iPhone launch, and therefore the increase in retail demand following Monday’s stock split is more likely to be a positive catalyst for Apple shares, in our view.
Tesla’s most recent rally was sparked by the announcement of a 5-for-1 stock split. That drove further interest in its shares which have been up 400% year-to-date. The rally appears unstoppable to many. Wedbush analysts led by Dan Ives are expecting a pent-up demand in China’s EV market for the Model 3s. Together with price cuts following the stock split, a perfect storm is shaping up for TSLA stock.
“We believe that the China growth story is worth at least $400 per share in a bull case to Tesla as this EV penetration is set to ramp significantly over the next 12 to 18 months, along with major battery innovations coming out of Giga 3,” Ives told clients in a note dated Sunday. Giga 3 refers to Gigafactory 3, Tesla’s Shanghai factory.