While splits change neither a company’s underlying economics or the intrinsic value of their shares, investors bought and added more than $100 billion combined to their market values.
Bloomberg: If luring a broader constituency of mom-and-pop investors to their shares was the motive behind the stock splits by Apple Inc. and Tesla Inc., it’s working. At least going by first-day returns.
Already plumped up by giant rallies in 2020, both stocks popped again Monday, supassing record highs after the corporate actions took effect. While splits change neither a company’s underlying economics or the intrinsic value of their shares, investors took them as occasion to do what they have almost always done this year — buy — adding more than $100 billion combined to their market values.
The share prices of both companies have soared in recent months — with Tesla advancing 496% this year and Apple adding 76%. Apple is now the only publicly listed U.S. company with a market capitalization over $2 trillion, while Tesla — an electric vehicle maker that aims to deliver just about half a million cars this year — has overtaken major corporations such as Walmart Inc., Visa Inc. and Johnson & Johnson. Tesla’s current valuation is about $464 billion, while General Motors, which delivered 2.9 million vehicles in the U.S. in 2019, is worth about $42.4 billion.
“We believe the stock split decision was a smart move by Tesla and its board given the parabolic move in shares over the past six months, with another stock split by Apple and likely other larger tech stalwarts will follow this same path over the coming months in our opinion,” Wedbush analyst Dan Ives wrote.
After closing north of $2,000 Friday, Tesla shares surged to roughly $500 following a 5-for-1 split. Nearly 115 million shares had changed hands on Monday.
A similar phenomenon happened with Apple after a 4-for-1 split that also took effect Monday. The iPhone maker had traded for more than $500 a share, a price tag so great it came to represent 12% of the Dow Jones Industrial Average. That fell below 3% in the price-weighted index on Monday with Apple at around $129 a share.
Apple shares closed up 3.4% to $129.04 Monday, while Tesla added 13% to $498.32.
Evercore ISI analyst Amit Daryanani sees the narrative for Apple “getting better” as the year progresses, helped by a “multitude of tailwinds” that include strong demand for its phones, as well as laptops and tablets as schools restart and consumers upgrade to newer devices.
For Tesla, the next major catalyst for shares will be its much-anticipated “Battery Day” on Sept. 22, followed by third-quarter delivery figures, Ives said.