Like clockwork, the pre-split rally in both Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) stock in the last week is one of the reasons for the drop that followed. Apple fell just 3% on the week while Tesla dropped 5.5%. But from its high, the drop of 12% and 16.75%, respectively, may trigger further selling ahead.
Regular investors will not know how algos trade but the magnitude of the drop in a few days could lead to accelerated selling. Fundamentals will not matter. Even with Apple at the $2 trillion market cap and a 36.8 times P/E, above that of Microsoft stock, Tesla trades at ~150 times price-to-free cash flow.
Investors who recently bought either stock at the top will have lots to worry about. If the momentum does not return soon, both stocks are unlikely to re-visit highs. At best, the stocks may bounce back to 50% from last Friday’s close and the 52-week high.
Buy-and-hold investors, especially with Apple, need not treat the top as a missed selling opportunity. Apple stock should not have rallied to those levels without any fundamental support. The iPhone refresh will, at best, sustain hardware sales rates. Software subscription growth will continue. So, Apple stock may trend higher over the next few years.
Tech Insider
