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Amazon Tesla Stock Splits (How To Trade) - YouTube
Channel: Humbled Trader
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we can either talk about stock splits
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infractions and math or we can talk
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about them in pizza your pick
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so you've probably heard that tech
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giants like amazon and google are having
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a split
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no not that kind of split nor this kind
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they are having a stock split a stock
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split what's that
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in this video we'll be discussing what
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is a stock split and we'll do that while
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we eat some delicious pizzas together
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we'll also talk about how a stock split
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affects some familiar stocks such as
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tesla apple and pretty soon google and
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amazon and of course how can we the
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retail investors and traders take
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advantage of this opportunity and make
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some money in the stock market so if you
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want to learn about all these different
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kinds of splits in this video and eat
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some pizza then remember to drop a like
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at the bottom of the video so what is a
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stock split you ask the fancy way of
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saying it is that a stock split is when
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a company increases the number of shares
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available and as a result lowers the
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price of the stock
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or visually speaking a not so fancy way
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of explaining it is that a company takes
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their stock and cuts it into smaller
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pieces this is an event that has to be
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voted and agreed upon by the publicly
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traded company usually the ceo or the
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cfo proposes that the company stock be
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cut into smaller pieces and that's
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called a stock split ratio then the
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company's board of directors have to
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vote on the decision recent examples of
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this are tesla's 5-1 split back in 2020
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and now amazon and google with their
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announcement to split shares 24 41 in
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february and march this decision is
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often made when the stock price has
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increased substantially as you can see
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from this amazon stock chart amazon was
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once trading at around 15
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after the dot-com bubble more than 20
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years ago since then the company has
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grown tremendously under the jeff bezos
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leadership online shopping becomes more
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popular and amazon banks billions of
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dollars of revenue per year as they
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swallow up market shares in other
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industries such as groceries physical
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bookstores consumer stables pharmacy and
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alexa listening to our most intimate
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secrets at home
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yes basically amazon is slowly taking
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over the entire world the stock price
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took off like a rocket from double
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digits to triple then broke through
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thousands in the last couple of years to
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a high of thirty seven hundred dollars
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and you can see it's a similar scenario
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for stocks at google all these share
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prices have gone up exponentially and
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are seemingly too expensive now if we
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take a look at apple share prices
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without the previous four stock splits
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the stock will be at eighteen hundred
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dollars today as for tesla it will be
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around four thousand dollars and i
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remember when we all thought 420 was
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going to be the peak on this monster so
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basically expensive companies like
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amazon want to split their stock as much
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as possible because that means everyone
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becomes insanely rich overnight and they
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deliver lambo to your door the next day
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right
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well not exactly
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in fact when a company splits a stock
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technically
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nothing happens
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and that's because of this thing in math
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called fractions okay i don't think i'm
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the best math teacher here believe it or
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not not all asians are good at math i
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guess it's not bad because all i have to
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tell you is that to find the least
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common denominator after you convert all
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integers and mixed numbers into
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fractions then find the lowest common
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multiple of the denominators before you
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can blah blah blah blah blah
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boring let me introduce you to our
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special segment for this video cooking
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with shea
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and by cooking i mean just taking a
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frozen pizza out of the freezer throwing
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it into a toaster oven and hope for the
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best that's the only kind of cooking i
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can do without setting the kitchen on
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fire and if you haven't hit the like
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button yet please remember to drop a
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like at the bottom of this video i'm
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literally risking setting my kitchen on
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fire for your learning and entertainment
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i promise i'll share this piece of pizza
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with you by the way this is my favorite
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frozen pizza from walmart not sponsored
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its thin crust is really good three
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dollars and fifty cents canadian for
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each box check them out bar store sports
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will give them a 15 out of ten okay yes
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we're still talking about stock splits
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here so bear with me i made this pizza
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because you hate fractions and we love
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pizza so win win now if i cut this pizza
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in two for you do you magically have two
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pizzas
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of course not i wish then we could have
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eaten this for breakfast lunch and
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dinner you still have one whole pizza
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just into two halves in a stock market
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we would call this two for one split and
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if i cut this into four pieces that
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would be called four four one split and
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finally if i attempt to do it like
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amazon trying to cut this pizza into 20
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pieces
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then we would have a 24 1 splits here
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and i guess i'm not eating lunch anymore
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in all these scenarios you and i did not
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get any more pizza it's just that the
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pizza is cut into smaller slices think
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of this as if you own a portion of the
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pizza pie the company is simply
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splitting your portion into smaller
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slices but your percentage ownership
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remains the same so ladies and gentlemen
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boys and girls this is exactly what
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happens with a stock split you get to
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eat pizza i mean you still have the same
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amount of ownership but in a higher
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number of pieces but just in smaller
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slices now that you understand what
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stock split is and know what my favorite
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cheap frozen pizza is the next thing you
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should know is that there are two common
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types of stock splits first is a split
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that is insanely sweet and delicious
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second is the splits i'm still working
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on and could get quite painful okay just
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kidding no one asked for that the first
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type of stock split is a regular stock
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split which is often referred to as
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forward stock split the second type is a
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reverse split the second type of split
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is less common and we usually only see
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these in small cap or micro crap micro
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cap companies it's called a reverse
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split because instead of cutting a pizza
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into smaller pieces now the pieces are
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actually bigger the number of pieces
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become less but the investors ownership
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remain the same this is something we see
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in many low float penny stocks with
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terrible fundamentals let's come back to
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the more common stock splits now forward
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split forward split is the most common
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kind we see on expensive stocks like
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tesla apple amazon or google for example
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a 24 1 split like what amazon is doing
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means the company is splitting the
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current number of outstanding shares
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into 20 pieces so the amount of
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outstanding shares for amazon would
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increase from 500 million to 10 billion
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and if amazon is trading at 2500 dollars
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at close on the day before the scheduled
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stock split then the new price the next
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day will be 2500 divided by 20 equals
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125 dollars remember the pizza
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demonstration earlier you better
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remember because i almost set the house
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on fire a stock split does not affect
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the valuation or anything else
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fundamental about the company at all it
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simply decreases the price of the stock
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making it cheaper and more accessible
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for investors and increasing the total
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outstanding shares at this point you
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must be wondering okay if a forward
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stock splits really doesn't do anything
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to a company's valuation then what's the
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point why is wall street and all the
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stock market investors so hyped up about
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this 20 to 1 split that amazon and
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google are doing in the summer well
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there are definitely some advantages and
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opportunities for us investors and
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traders to profit first is simply the
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perceived discount in the stock price
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after the 24 1 splits the amazon or
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google would do this summer the stock
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prices will go down from around 2500 to
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125. of course i'll depend on the actual
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stock price this summer remember not
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every investor could afford to buy one
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whole share of amazon or google at 2500
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therefore the company's intention is to
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make the stock more accessible to a
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larger number of retail investors
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because of the lowered price and
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hopefully the stock value will
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eventually increase as well due to the
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new pool of investments drawn to the
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company the second advantage of a
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forward stock split is the boost in
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liquidity remember we said that the
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stock splits increase the number of
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shares but decrease the share price by
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having higher number of shares it also
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becomes easier for existing shareholders
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to purchase even more stock the third
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advantage of a stock split is really a
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result of the previous two many times we
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do see the stock split leading to an
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increase in higher share prices
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overall and an increase in companies
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valuation yes while i did say stock
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splits does not directly increase the
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company's value it does sometimes cost
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the stock price to run
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because of the influx of new buyers
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causing the price to increase as more
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people purchase the stock and invest
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money into the company looking at the
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tesla stock chart here you can see the
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stock moved up starting from the date of
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the stock split announcements on august
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11 2020 leading to the actual date the
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five to one stock split took effect on
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august 31st the stock had almost
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increased by 70 percent short term
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during that two to three week time frame
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and long term the stock had continued
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rallying higher to all-time highs around
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october 2021. you can see it's a similar
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price action on apple stock as well
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following their previous five stock
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splits with the most recent one in
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august of 2020. so how do we traders and
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investors can profit from these stock
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splits like we mentioned in the short
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term these stock split events could
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actually be good swing trade candidate
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as we've seen stocks rally into the
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forward split event in 2020 however that
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would only be viable in an extremely
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strong bull market in 2020 and 2021 i
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actually participated in a tesla stock
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split swing trade two years ago and in a
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current on certain market environment in
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march 2022 i would refrain from doing
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the same long swing trade again however
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speaking as an investor now companies
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that issue forward stock splits are
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generally a sign that the business is
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doing well especially when the company
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pairs this news with additional share
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buybacks like what amazon and google are
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doing so if you've been considering
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investing in these tech giants after a
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stock split can be a good time to do so
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because again you could now potentially
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own a whole share of this stock at
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lowered prices i'm actually a google
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stock shareholder myself and with this
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recent announcement i'm actually even
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more bullish on the future growth of
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this company and i'm actually really
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excited to be adding this investment
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during the recent 2022 correction i
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won't be day trading or swing trading
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these stocks i intend on holding this
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investment for the long term growth so
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hopefully you guys learned a thing or
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two about stock splits and its effect on
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the company's share prices for me i
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really did enjoy this delicious 3.50
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frozen pizza if you found this video
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helpful or just found cooking with shay
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the segment really entertaining please
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remember to drop a like so i can buy
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even more frozen pizzas let me know in
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the comment section below if you will be
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investing in amazon or google after the
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stock splits or if you simply want to
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see more cooking with shave videos thank
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you guys so much for watching as always
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i'm the humble trader and i'll see you
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guys next time
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[Music]
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[Applause]
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[Music]
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