Apple Stock Split: The Buzz is growing, is there one around the corner?

Apple Stock Split: The Buzz is growing, is there one around the corner?

Apple Stock Split: Analysing the scope of yet another stock split of Apple’s Stocks in the recent future.

Apple took 38 years as a public traded company to reach $1 trillion mark in terms of market capitalization, but just took two more years to add another trillion in its market capitalization and many believe that 2020’s version of stock split is the main boost behind this rally in the market cap.

Apple Stock Split: Apple Stock Split History

DateSplitPrice before Split3 Months Change1-year ChangeNotables
Aug 31, 20204 :1$502(4.8%)21.4%Down 18% three weeks after split
June 9, 20147:1$6566.7%38.6%Unveiled Apple’s Watch three Months after the split
Feb 28, 20052:1$90(8.8%)59.6%Down 23% 2.5 months after split
June 21, 20002:1$11120.6%(57.2%)Fell when the dot-com bubble burst
June 16, 19872:1$7931.9%16.6%Down 50% during October 1987 market crash

Also Read: Tesla Stock Split

Apple Stock Split: Effect of Apple’s Stock Split of August 2020 on Dow Jones Industrial Average

Dow Jones Industrial average has had many companies in and out over its 136 years’ life but Apple’s 4-for-1 stock split had a rather unusual effect on Dow Jones. As S&P 500 and MSCI World Index take the weight of a stock based on its market capitalization, Apple’s split did not have much effect on the index. The Dow, instead of using the constituent’s market capitalization, uses the share price. Before the stock split, Apple’s share price was around $503 in the last week of August and that made it Dow Jones Industrial Average’s largest constituent, after the split, Apple fell somewhere in middle, greatly sabotaging its influence on the index’s return.

It reduced the Tech sector weighing in the index from 28% to 20% and to address this shortfall, index added salesforce at a share price of $208. It was also followed by the removal of three big companies (Exxon, Raytheon, and Pfizer) from the index and the addition of Honeywell and Amgen in the index.

It proved that although the share split is technically non-consequential for a company, but this Apple’s split had a rather unusual impact on Dow Jones Industrial Average.

Apple Stock Split: Buzz on Google

The Buzz for a stock split has been rising over the last 30 days

Apple Stock Split: The Buzz is growing, is there one round the corner?

Apple Stock Split: Outlook

Apple stock price is up by more than 33% in the last year. As stock prices have soared, key valuation metrics have also skyrocketed to their highest levels in more than a decade. The company’s price to earnings, price to sales, and price to free cash flow ratios all remain much higher than their five years average. Today’s P/E is roughly 30, while five years average is nearly 20, Apple needs to grow at a steady rate or the share price could fall further.

Apple stock has climbed leaps and bounds since the last split and technically split has nothing to do with it but it does create a buzz that creates momentum for the stock if not in the long term, at least in the short term. Also, it seems highly unlikely that Apple will announce another stock split in the near future as prices are still climbing (trading around $172) as shares were close to $500 at the time of the previous split. Apple may think of another stock split, but for the time being, this move will not be in the best interest of the company as the share price will be slashed below $100 (considering at least a 2:1 split).

Also, history shows that it is never a bad time to buy Apple stock as long as investors are ready to hold it for the long term. So, a good investor should not wait for a stock split if he intends to buy Apple’s shares.

Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

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