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Much of the buzz on Wall Street these days focuses on the idea that value is positioned for a comeback. Tech stocks are running out of steam, can’t go on forever, time for new leadership, etc.
But history is on the side of Tesla TSLA, -1.13% and Apple AAPL, -0.16% , according to online broker eToro, which took a look at decades of data to find that a basket of the biggest name brands have historically enjoyed a 33% rally, on average, a year after splitting their stock.
Apple is splitting its stock for the fifth time, while this will be Tesla’s first.
By comparison, Amazon AMZN, +0.05% has split its stock three times, rallying an average of 209% the following year. Microsoft MSFT, +1.02% has done it nine times, with a gain of 47%. It’s not just tech either. McDonald’s MCD, +1.28% has split nine times, as well, averaging a 22% annual return. Coca-Cola KO, +3.31% , nine times for 11%.
Apple’s history isn’t quite as stellar as all those, with its four previous splits resulting in an average gain of 10.4% in the following year. However, that includes a disastrous 61% plunge in the 12 months after its June 2000 split, which was a result of the popping of the dot-com bubble.
“Retail investors are increasingly engaging with the financial markets, and many see the benefit in investing in the companies who produce products they love and use daily,” eToro analyst Adam Vetesse said. “Tesla and Apple are two such companies.”
In fact, investment dollars from eToro users are pouring into Tesla and Apple, having risen 35% and 167%, respectively, since the announcements, compared with the three weeks prior.
“The ability to buy into these highly popular companies at more attractive [post-split] prices will prove too tempting to turn down for many investors,” Vetesse said, adding that both stocks could “rocket” even higher than the historical averages in this climate.
Shares of both Apple and Tesla were up nicely in Wednesday’s session, while the Dow Jones Industrial Average DJIA, +0.56% was stuck in the red. Both the S&P 500 SPX, +0.67% and Nasdaq Composite COMP, +0.60% were higher, at last check.
