NVDA: Buy or Not Buy, that is the Question.
$NVIDIA Corp(NVDA)$, at $1,224.40 a pop, may not be a price that some investors are able to afford.
The good news is the semiconductor company has announced that the stock split will happen at the close of the market on Fri, 07 Jun 2024.
Before Split - To Buy or Not To Buy?
This brings me to the question - is it “wise” to buy into the company Before or After the split; regardless whether budget is or is not an issue.
My Viewpoints: (mine only)
Logically speaking, In terms of overall investment value, it does not inherently matter if an investor buy before the Nvidia stock split or after.
This is because, the stock split itself does not change the company's fundamentals or total value.
Here's why:
Split ratio: Nvidia is doing a 10-for-1 split. This means if you own 1 share before the split, you'll get 10 shares after.
Price adjustment: The price per share will be adjusted proportionally. So, if the pre-split price is $1000, the post-split price will be =$100 (1000 / 10).
In essence, it becomes an investor will own a larger number of lower-priced shares.
Other Factors for considerations:
Accessibility: After the split, the lower share price might attract more investors, potentially increasing demand and influencing the price in the long run.
Short-term volatility: There could be short-term fluctuations around the split date due to trading adjustments.
Trick is to focus on one’s long-term investment strategy and Nvidia's performance as a company, not the timing relative to the split.
Budget Constraint.
If budget is a concern, then buying Nvidia stock after the split (on or after 10 Jun 2024) would be Hobson’s choice.
This is because:
Lower share price: Due to split, the price per share will be significantly lower. This allows an investor to buy some shares (within budget) compared to buying before the split.
Owning more shares: Even though the price per share goes down, the total value of your investment stays the same. With a limited budget, investor will end up owning more shares which can benefit him / her in two ways:
Potential for growth: If the company performs well and the share price increases, your more numerous shares will see a greater total gain.
Dividend payouts: If Nvidia offers dividends, you'll receive them on each share you own. Having more shares translates to more dividend income.
However, do note:
Post-split price movement: The lower share price after the split might attract “more and new” investors, potentially increasing demand and driving the price up.
So, the price on 10 Jun 2024, might not be the absolute lowest.
In summary, if affordability is a valid concern, then waiting to buy after the split makes sense.
Looking Back.
Still unsure, could referencing past stocks split help?
$Tesla Motors(TSLA)$ (August 2020, 5-for-1 split).
In the month following the split, Tesla shares fell about -14%. They recovered within 2 months and were up about +36% six months after..
$Amazon.com(AMZN)$ (June 2022, 20-for-1 split).
There wasn't a significant price movement immediately following the split. The stock price actually rose slightly the following week.
$Alphabet(GOOG)$ (July 2022, 20-for-1 split).
Similar to Amazon, Alphabet's stock price didn't experience a major shift right after the split. It saw some volatility in the following weeks.
$Apple(AAPL)$ (August 2020, 4-for-1 split).
Apple's stock price remained relatively flat in the week after. It did experience some growth in the following months.
With all possible information provided. Able to decide Now ?
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I am guessing the power that be want to keep this around $1200 before split.
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