Euphoria for TESLA and APPLE. Where can it lead?
Nasdaq makes new highs. S&P500 record-breaking. Markets rise and there is euphoria over Tesla and Apple following the split.
Going by the year-to-date (YTD) returns of Apple and Tesla, we see mind-boggling figures. On Apple we are over +70%. Tesla +440%. Today, after hearing about it for quite some time, the split on these two titles takes place. Specifically, for each Apple share the holder received 4 shares of the total value. On Tesla the split was 5 for 1.
No value was destroyed or created by the split. Capitalization remained the same for both companies.
It is curious to see how much Apple and Tesla stock prices have risen from the announcement of the split to today. Apple has seen a price rise of 30 percent, Tesla 63 percent. In terms of capitalization Apple added 493 billion usd while Tesla 161 billion. This might suggest a buy on rumors, sell on news. However, the shares of the two brands are also rising today.
Thanks to the split, the prices of the two stocks have become more affordable even for small retail investors.
But what is it that has caused prices to rise so high in the run-up to the split? Where does this euphoria for Tesla and Apple come from? We wrote it in the sentence above: the ability to buy whole shares and not fractions of a share, as some brokers allow, has created euphoria in the markets.
Psychology plays a key role. Seeing Tesla’s price at $450 is more palatable than seeing it at $2200. Especially after seeing it at those figures, the $450 seems even low. Same for Apple. The two titles are both coming from a bull run and so it seems they intend to continue.
Has it become cheaper to buy now?
It agrees as much as before, nothing has changed in this respect. It will be interesting to see how far the market will push the prices of these two stocks and whether we will ever see their previous values again. Amazon, which currently trades above $3400, could take the next step. This proves that although Amazon’s price is above Tesla’s and Apple’s, the stock rises big anyway.
The split of these two titles is somewhat reminiscent of the Dot-com era, where splits were the order of the day. The only specter in the closet remains this one.
As for Tesla, you can find my view on the stock in this article (here). On Apple we are working on it. Something will be ready soon.
Do not get caught up in euphoria, but act rationally. Thank you for reading.