“Just last week, I was explaining to one individual that she should be adding Apple (AAPL) to her portfolio. She asked, ‘What is the price at currently?’ When I stated that it was around $300, her reaction was ‘Wow, that is expensive.’ The thing is, she has never done any research in regards to AAPL and just because the price of the stock is high, it does not indicate that the stock is overvalued,” Anderson writes. “Just taking the price of a stock has no relevancy to the actual value, I explained. Now, she is a very intelligent individual, with a PhD, but I believe that many investors have this misconception of a ‘high priced’ stock. Depending on the company, market, and situation, a stock split can be very beneficial to shareholders and thus the company.”
Anderson writes, “The fact that Apple has a forward P/E of less than 20 based on 2011 full year earnings is astonishing. For Microsoft (MSFT), it may make sense, but Apple consistently outperforms and as large as the company is, it continues growing significantly as well… What is amazing is that Apple has beaten estimates for 31 straight quarters and in most cases of those quarters, it has done so easily. The last 31 quarters takes us all the way back to April 16, 2003. Do you really think anything is going to change all of sudden? While it may be possible, it is extremely doubtful.”
Read more in the full article here.
MacDailyNews Take: How does making the price more comfortable for less-savvy (and therefore much more fickle) investors help Apple Inc. in the long run? After all, it’s not like they’re under-financed and in need of operating cash.
For those who see the share price as daunting, but still want to get in on Apple: Establish a brokerage account that allows you to buy partial shares and have at it.
[Thanks to MacDailyNews Reader “GetMeOnTop” for the heads up.]
Yet, a splitting means: several smaller “traders” might buy to try it out. These will never be buying 300$ or more shares and might seam very unimportant… yet… lots of people buying little still makes a mass of selling. Do the math…
lurker – sounds like you own Overstock shares.
@ajdowntown,
A stock split doesn’t affect revenue one way or the other.
@pridon,
The DJIA uses a scaled average. Splitting would have no impact on Apple being in the DJIA either.
@Big Al
I think you meant a cunnilinguist.
I favor a stock split. The lower cost per share would allow younger people who are Apple’s biggest users to buy shares more readily. It would also make the trade more about the stock and less about Options. The Hedgefunds manipulate the stock and hold it back since they love the short side. A Bear Raid that we have at least once per quarter will be much less succesful if it runs the stock down only $1.50 per share rather than $15.00. Perhaps they will then go get a new YO-YO to play with. Also Cramer could recommend owning the Stock instead of “deep in the money calls”. This allows Apple to hold their billions and still help their Shareholders.
No to a split. It’s annoying that this issue keeps being raised by people who don’t understand splits. My guess is that if Apple does ever split its shares, it will be for a better reason than, “Uhhh, the stock is too expensive…”
@ Dand
Institutions control roughly 75% of stock transactions. Relatively speaking, a few “younger buyers” won’t make a damn bit of difference in the stock price, especially since younger people tend to have much less to spend anyway and most younger people know nothing about, and have little interest in, the stock market.
Regarding your bear raid argument, yes, the stock would go down $1.50 rather than $15 per share, but it will affect ten times as many shares, so there is absolutely no difference in either case. Also, bear raids are much more difficult to perpetrate than they were years ago, especially in a stock that is as widely traded as Apple is. Further, the effects of a bear raid would be extremely short lived since so many people would jump in to buy the stock when it reached a significant price point (either prior price support or a moving average).
Regarding Cramer, an experienced options buyer isn’t concerned with what Apple wants or in helping the company’s shareholders. An options buyer is generally a more sophisticated investor than a stock buyer and will probably have valid reasons for purchasing the option. *Amateurs* generally buy either out-of-the-money calls or calls at or near the strike price; anyone buying deep in the money calls is an experienced investor with money to spend. There are very good reasons to own deep-in-the-money calls, none of them having to do with what Apple or its shareholders want.
My point being that there is absolutely no reason to split the stock now. The only valid reason would be a lack of liquidity, and that is not currently a problem.
I hope they don’t split it.
But, it would actually drive the price higher because people are stupid.
Anyway. I don’t except Apple to do it, it’s not their style. Just like they won’t pay out a dividend.
People said 200 was too high…. and im sure at 100 they said the same thing.. So Apple will have to drop to what.. $20 like M$ and that would be a decent price??
Wrong question! Helping Apple is secondary to creating value for the existing stockholder. The stock split helps Apple stockholders by making it more attractive to small investors thus creating more demand. More demand results in higher prices. Most stock splits do not change things but most stock splits do not occur at prices north of $300. Many people do not have $30,000 to buy 100 shares of a stock and they do not like to buy odd lots.
Perception is reality in this case. If a split would increase demand for the stock then have at it.
The biggest drag on Apple’s share price in the near future is a perception that the total valuation can’t possibly keep going up.
The fundamentals are good. The growth looks like it will continue. The product pipeline is solid. The valuation is conservative.
It’s a perception problem. Can a computer company be worth a trillion dollars?
They can’t do anything about the total valuation. The one thing they can do to fight the perception (in addition to continuing to crank out stellar revenue/profit growth) is split the stock. It feels cheaper, therefore it seems more reasonable to let the share price keep rising.
Rational? No. But the stock market (any market) is half psychology.
Where does anyone get the idea that splitting the stock provides revenue to Apple? It does nothing of the sort!
I just convinced my wife to buy BIDU near 100, but could not convince her to buy more AAPL at 325.
For new investors or current non-Apple investors…on the surface…the author is right. For current AAPL investors…who cares if they split or not.
Consumers just plain don’t want to do extensive research and many, like me, don’t want to pay a self-interested brokerage.
@Kent. Sorry but “real” investors don’t look at stock price as their research.
MDN nailed it in their take.
But….I don’t think a dividend is out of the question, but I’m the first to say I never actually understood how the stock market makes me money, I just take it and smile.
Splitting the stock does “Apple” no good at all. Apple would only potentially benefit if the stock price increase *and* Apple decided to raise capital by issuing more shares of AAPL or use shares in an acquisition.
But Apple has $51+B in cash and shot term securities and zero debt. There is no incentive to stock split. In addition, most outstanding AAPL shares are owned by institutional investors. They don’t care if the stock price is $300+ as long as the stock is fairly valued.