Shares of both companies rose Monday, their first day of trading post-split. Apple shares are up nearly 36% since July 30, when it announced its 4-for-1 split. Tesla’s stock is up almost 76% since its announced its 5-for-1 split on Aug. 11.
Market watchers are divided on what the splits may mean for Apple and Tesla. Here’s what five of them told CNBC on Monday:
Daniel Ives, managing director of equity research at Wedbush Securities, predicted the splits would drive Apple and Tesla higher:
« I think this was a smart move by the companies and the board[s] and ultimately I think there’s going to be more stalwarts that follow. And I think right now, they’re just in a position of strength if you see what’s happening in terms of the market, of course on the EV side with Tesla and then Apple going into a supercycle. And this was the smart move at the right time in terms of the stock split and I view it as putting more sort of gasoline in the tank in terms of these stocks moving higher. »
Sarat Sethi, managing partner at Douglas C. Lane, cautioned investors not to buy in simply because of the splits:
« I think the idea that you can have more pieces of a pie for the same pie is concerning, especially for long-term investors and I think the ability for some of the retail investors to get in there and trade. So, that’s kind of making me a little wary when you look at how fast some of these stocks are moving when they’re announcing splits and some of the stocks that are just moving in these huge ranges even though the broader market’s not moving. â¦ So, I think when you get some of that air coming out of the bubble, it might bring down some of the rest of the market and that’s kind of where we’re going to see some, hopefully, resilience in the breadth of the market. And stocks that have solid balance sheets and good growth that are trading at what we think are good discounts to the market should outperform when the retail investor’s going to probably get hurt in some of these stocks that they’re just buying because they’re splitting. »
Leon Cooperman, Omega Family Office chairman and CEO, emphasized the moves don’t actually generate a higher valuation:
« Everybody understands that splits don’t create value. My dad once told me if he gave me five singles for a $5 bill, I’m no better off. … Apple’s up 30% with the S&P up 6% and everybody’s talking about the split. The splits don’t create any value. »
JJ Kinahan, chief market strategist at TD Ameritrade, suggested Apple’s and Tesla’s moves could fuel demand:
« I do think it will add to some increased demand. It’s become a lot more affordable for people overall. In 2014, we saw incredible demand for this. In fact, we saw five times more trades on a stock split day and seven times more accounts place a trade. Now, I don’t expect near that type of lift, especially considering the increased volume we’ve had over the last six months and â¦ the incredible run-up that most stocks have had. However, I do think â¦ sometimes people forget that capital management is the biggest thing the retail investor has to do, and so now, this may [put] people in a situation where buying 100 shares, etc., isn’t such a giant part of their account so more people will consider it. »
Roger McNamee, co-founder of Elevation Partners, said he was trimming his tech positions regardless of the splits:
« I look at the market. I look at the stock split. I realize there’s a lot of momentum here. And you never know when the momentum’s going to end, and I’m not trying to make a call on that issue. I’m just saying that, for me, this is enough. It’s been a great ride. And it’s not just Apple that I’ve been selling. I’m looking broadly through my tech portfolio â and I own a bunch of names â and I have been reducing positions across the board simply because I want to reduce the level of risk I’m taking in the market. I’ve had a year in the market that’s been truly extraordinary notwithstanding what I think is demonstrably the worst year of reality of my lifetime. »
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