Apple’s decision to split its stock shows company has high expectations for the future

“Apple today announced a two-for-one stock split, which will double investors’ shares held at the close of business on February 18. Trading of the newly split shares will begin 10 days later,” Jennifer LeClaire reports for MacNewsWorld. “The split comes after iPod and iTunes sales and the introduction of a mass-market, low-price Mac mini have fueled record-breaking revenues and soaring stock prices during the past year. Apple’s stock has posted a fourfold increase during the past year. Analysts said companies split stocks at certain thresholds to attract new investors who might be unwilling to purchase shares at higher prices.”

“‘Overall we are seeing better action in technology stocks today, so Apple’s announcement is set against a positive backdrop,’ Pado said. Stocks don’t split every day — and for good reason. Pado said the last thing a company would want to do is split a stock and then have it fall. Thus, Apple’s decision to split its stock would appear to demonstrate high expectation for forward progress, he said,” LeClaire reports. “‘Apple’s decision says a lot about how the board and the company’s administration feel about their future prospects,’ Pado said. ‘That’s being reflected not only in Apple’s stock, but it’s helping the tech companies in general. There is a positive feeling in the market.'”

Full article here.

20 Comments

  1. Microsoft recently had a stock split and their share price still fell, that’s because the market saw through it, it was a trick to boost interest.

    Dell and Apple will be around the same $40 level so it’s more entertaining to track them for a while, till AAPL leaves DELL in the dust again

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  2. “Dell and Apple will be around the same $40 level so it’s more entertaining to track them for a while, till AAPL leaves DELL in the dust again.”

    I know what you’re trying to say, but let’s make sure pople don’t confuse stock price with market cap. At $80/share, Apple is worth about $32 billion on Wall Street. Dell at $40/share is worth $99 billion.

    When Apple’s stock split, the stock will trade around $40/share, but it’ll still be a $32 billion company. Apple shares would then have to climb to $120/share and then split 3-to-1 before DELL and AAPL become comparable in terms of stock price.

    Now, which is the better investment? AAPL, of course. But saying AAPL is $40/share and DELL is $40/share is pretty meaningless in and of itself. The only instance in which such a comparison would be useful is to plot relative growth. For example, if AAPL rose to $50/share from $40/share after the split, it’ll have gained 25%. DELL in that same period will probably still be trading around $40/share, or a 0% gain (or loss).

  3. This split says tome that Apple has some big things happening behind the scenes. All these rumors of a G5 powerbook as well as Apple finally catching up to its promise of its processors reaching 3gHz. This should pan out greatly over the year.

    My 2 cents

  4. At >$80/share, the stock seems expensive. At ~$40/share, people feel they are getting more for their money.

    Institutions will trade based upon other factors. The split really is get the common folk to jump in.

    Just a good sales tactic really. Anybody scared by Berkshire-Hathaway’s stock price?

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