NVIDIA stock - armchair expert analysis needed

[Tahir2]

http://finance.yahoo.com/q/bc?s=NVDA&t=3m&l=on&z=m&q=l&c=

Same thing happened in Aug '04

Is this a "dumping" of stock?

geo, Uttar any comments guys?

 

[Dave Baumann]

The stock spilt - 2 shares from 1, so it halved the value, but doubled the number of shares. They've done this before as well.

 

[Tahir2]

That's a good thing isn't it?

Alright I admit I am totally green to this - perhaps someone could talk me through what happens when a stock splits to the current share owned by an individual - do they halve in value as well?

 

[Sunrise]

Alright I admit I am totally green to this - perhaps someone could talk me through what happens when a stock splits to the current share owned by an individual - do they halve in value as well?

You get double the amount (2:1) of stocks, therefore the new value of each stock will be half that, before the split. That´s pretty much all that is really important for an individual.

 

[Pete]

I've always wondered about splits. Is this mainly a preception issue, in that (uneducated) ppl would be hesitant to value NV more than a certain $ amount? Do all shares split?

 

[Geo]

I've always wondered about splits. Is this mainly a preception issue, in that (uneducated) ppl would be hesitant to value NV more than a certain $ amount? Do all shares split?

Back in the day, it was pretty hard to buy stocks except in 100 share lots, so a lower stock price did encourage smaller investors.

Ever priced Berkshire Hathaway. . .Warren Buffett's holding company? Not so fond of day traders.

 

[Maintank]

Back in the day, it was pretty hard to buy stocks except in 100 share lots, so a lower stock price did encourage smaller investors.

Ever priced Berkshire Hathaway. . .Warren Buffett's holding company? Not so fond of day traders.

Didnt it top out near $8000 per share?

 

[Geo]

Didnt it top out near $8000 per share?

In the immortal words of Bob Uecker --"Juuuuuuuust a little outside!"

http://money.cnn.com/quote/quote.html?symb=BRKA

 

[Maintank]

In the immortal words of Bob Uecker --"Juuuuuuuust a little outside!"

http://money.cnn.com/quote/quote.html?symb=BRKA

So I was off by a multiple of 10

 

[Pete]

Back in the day, it was pretty hard to buy stocks except in 100 share lots, so a lower stock price did encourage smaller investors.

Ever priced Berkshire Hathaway. . .Warren Buffett's holding company? Not so fond of day traders.

Heh, good example. You gotta admire a stock that loses over $600 of value and yet that translates to a drop of less than 1%.

 

[DudeMiester]

One day, I hope to own one of their shares. We all have our dreams...

 

[Razor1]

That's a good thing isn't it?

Alright I admit I am totally green to this - perhaps someone could talk me through what happens when a stock splits to the current share owned by an individual - do they halve in value as well?

Its a good thing definitly, but only in the long term,

by doing the stock split, it gives the company the possiblity to pool up money in the short term, but also increases thier P/E ratio by the same amount as the split, so on paper and by numbers its not as good of stock to invest in for long term holds.

 

[trinibwoy]

I've always wondered about splits. Is this mainly a preception issue, in that (uneducated) ppl would be hesitant to value NV more than a certain $ amount? Do all shares split?

Yep, it is mostly perception. It works too - I'm tempted to increase my holdings at $30 bucks a pop but wasn't too crazy about $60. And for no good reason either.

 

[trinibwoy]

by doing the stock split, it gives the company the possiblity to pool up money in the short term, but also increases thier P/E ratio by the same amount as the split, so on paper and by numbers its not as good of stock to invest in for long term holds.

Razor, stock splits do not generate revenue for the company. The only time a company raises funds is from the initial issue (IPO) or any subsequent issues. P/E ratio is also unaffected because EPS decreases by the same factor as the price so the ratio remains the same.

 

[Razor1]

Razor, stock splits do not generate revenue for the company. The only time a company raises funds is from the initial issue (IPO) or any subsequent issues. P/E ratio is also unaffected because EPS decreases by the same factor as the price so the ratio remains the same.

That is true about the revenue, I was just giving a general statement on that.

P/E ratio is affected, P/E ratio is calculated by by total number of shares / earnings per share over the past 4 quarters if I'm not mistaken

 

[inefficient]

I've always wondered about splits. Is this mainly a preception issue, in that (uneducated) ppl would be hesitant to value NV more than a certain $ amount? Do all shares split?

The main reason to split your stock and reduce the per share value is to attract individual investors and smaller investors.

Round lots (100) or even lots are still perfered transaction unit. If you don't buy in a round lot you will wind up having to pay a penalty or slightly more than the bid price.

Nvidia at $60 * 100 would have cost $6000, now at $3000 it is more affordable for an individual.

Another reasons is that options and other contracts traditionaly represents a round lot of 100 shares. If you want to make options or other products derived from securities affordable you want to split.

Finally, a big reason is broker commissions. When your broker is making a commission based on number of shares traded. Of course they are going to perfer larger trading volumes and will encourage their clients to split as often as they can.

 

[trinibwoy]

That is true about the revenue, I was just giving a general statement on that.

P/E ratio is affected, P/E ratio is calculated by by total number of shares / earnings per share over the past 4 quarters if I'm not mistaken

P/E ratio is (price / EPS) not (shares / EPS). I believe historical EPS is adjusted to reflect the new number of shares. The ratio of price per share / earnings per share is meaningless mathematically and financially if you use a different number of shares in the numerator and denominator.

If you look at current 52wk moving averages you'll see they were cut by a factor of 2 as well.

 

[trinibwoy]

Finally, a big reason is broker commissions. When your broker is making a commission based on number of shares traded. Of course they are going to perfer larger trading volumes and will encourage their clients to split as often as they can.

This is a bit outdated. The commissions broker business is on its way out. Most brokers are adopting a flat fee model because it allows for more consistent revenue across market fluctuations. This especially applies to smaller investors since most brokers only start charging commissions over a certain volume - say 5000 shares.

 

[trinibwoy]

Another reasons is that options and other contracts traditionaly represents a round lot of 100 shares. If you want to make options or other products derived from securities affordable you want to split.

Stock price has very little impact on option pricing. Volatility, time to maturity, strike price and "changes" in the price of the underlying security are vastly more important.

 

[Razor1]

P/E ratio is (price / EPS) not (shares / EPS). I believe historical EPS is adjusted to reflect the new number of shares. The ratio of price per share / earnings per share is meaningless mathematically and financially if you use a different number of shares in the numerator and denominator.

If you look at current 52wk moving averages you'll see they were cut by a factor of 2 as well.

Hmm I don't think so let me look it up lol

from wikipedia

The price per share (numerator) is the market price of a single share of the stock. The earnings per share (denominator) is the net income of the company for the most recent 12 month period, divided by number of shares outstanding.

Ok so both of us were off but number of shares does play an important roll, double the shares, will still effect the over all P/E ratio. Hmm nope you are right effect the p/e ratio, still have the price per share that will even it out