It has been a while since a big name stock has decided to do a split. But in the last few weeks we have had 2 major hitters announce that they are doing a split on August 31. Apple(AAPL)has announced they are doing a 4 for 1 stock split meaning that for every 1 share you have they will turn into 4 shares. Tesla(TSLA) also announced that they will be doing a 5 for 1 stocks split which means that for every 1 share you have they will turn them into 5 shares. This does not mean though that you get those shares at the current price. That means that the share price will also split by that amount as well. Both of these companies have been very bullish especially since Covid-19 has hit, I personally feel that both these companies are trying to cool down the share price so that they can get more investors on board.
Although I do not own and probably will not own either of these companies I think that this is an amazing opportunity to get in on a great investment. When a big company like these 2 do a stock split it is always a great chance to get in at a cheap price with a great company. Apple is also not one to be shy with stock splits, the last time they did one was only 6 years ago in 2014. They were about $700 USD/share and they did a 7 for 1 stock split. They also did a 2 for 1 stock split in 2005, 2000 and 1987. Needless to say this up coming split is going to open up a chance to get in on the first company with a $2 Trillion Market Cap.
Tesla on the other hand has never done a split. They have really only been a public company for 10 years, unlike apple who will be a public company for 40 years in December. This year has actually had some very notable stock splits even before these ones. Aurora Canabis(ACB) did a 1 for 12 reverse stock split in may, that means that for every 12 shares you have they turned it into 1. That helped the share price temporarily recover but they haven’t been having very good sales lately and they have been in decline since. Telus(T) did a 2 for 1 stock split in March and I feel that they haven’t really been able to recover yet. They have started to gain some traction as of late and I personally decided to add some to my TFSA and why not, they are Bell Inc’s(BCE) biggest competitor and everyone knows that Canadian Telecoms are a monopoly.
Even with Tesla’s big run as of late I still feel that they are completely overvalued. In this scenario of these 2 big companies splitting I would go for Apple over Tesla. Apple for me is one of those rare companies that are both a growth and an income stock. Tesla is at this point trying to become a growth stock and they are moving in the right direction by FINALLY having 4 consecutive quarters of positive numbers. Right now they are really just an auto manufacturer who also does solar panels on the side. They really have no big part in any of the markets they are in except for EV which is still a very small market. Apple on the other hand has their hands in so much from smart phones/tablets/computers, credit cards and even their own streaming service. For all of these reasons I feel that Apple would be the smarter choice, even with their dividend getting split along with everything else.
You might be asking now, which is better though buying before or after the split? It really doesn’t matter to be honest. The only people it will make a difference to is people who cant afford to buy their shares at the price they are at right now but still want a piece of the pie. A split doesn’t change anything for the company or their valuation which is good for long term investors as well. Being able to get in at such a discount may give people who didn’t know that the split was happening the idea that the stock had plummeted but a correction will normally happen next. The only thing you need to watch out for and maybe keep away from if you aren’t used to it is a reverse split.
Here is a look at where Tesla, Telus, Aurora and Apple are trading at today.
Tesla(TSLA)-$1878.53USD/Share, $350 Billion Market Cap, 1.9 EPS, 216 P/E(forward). A 5 for 1 split today would be about $377.42USD/share.
Apple(AAPL)-$462.83USD/Share, $2.0 Trillion Market Cap, 13.2 EPS, 35.6 P/E(forward), Dividend Yield of 0.71%($3.28/share) and a Dividend Payout Ratio of 27%(12 months trailing). A 5 for 1 split today would be about $115.56USD/share.
Telus(T)-$24.18CAD/Share, $30.9 Billion Market Cap, 1.17 EPS, 20.5 P/E(forward), Dividend Yield of 4.82%($1.17/share) and a Dividend Payout Ratio of 99%(12 months trailing). They did a 2 for 1 stock split which went from $44CAD/share to $22CAD/share(roughly).
Aurora Cannabis(ACB)-$13.03CAD/Share, $1.43 Billion Market Cap, -184 EPS, N/A P/E. They did a 1 for 12 reverse stock split which took them from $1CAD/share to $11CAD/share(roughly).
As you can tell, Tesla’s share price is really reflective of speculation and not their actual financial statement. Apple on the other hand is an investors dream company, their strong numbers and financial statements are reflective of that. That is the main reason why I would stay away from Tesla for now and look more closely at Apple given this once in a 6 year opportunity. I’m not saying that Tesla will never be a company I would buy, i’m just saying that right now there is not enough there for me to invest in as a company.
That is all for today and remember everyone, invest in yourself first.
*Disclaimer, all share prices are after market close as of today August 19, 2020. I currently do not hold a position in Apple, Tesla or Aurora but I do have a small position with Telus.