Yesterday after the close, Apple announced earnings, and even though some of the focus had been on the better-than-expected numbers, the company had also announced a stock split. What is a stock split and what would this mean for those wanting to buy Apple stocks or CFDs, would be the main topics of today’s article.
Apple 4-1 stock split to take effect at the end of August
This stock split will mean that for each AAPL stock held by an investor, three other will be received. It’s the fifth Apple stock split since the company went public:
- 2-1 stock split in June 1987;
- 2-1 stock split in June 2000;
- 2-1 stock split in February 2005;
- 7-1 stock split in June 2014.
Although stock splits are purely cosmetic and do not generate fundamental changes for the underlying company, there are some positive implications associated. Since the AAPL stock is currently trading around $400, that would mean investors/traders will be able to purchase it for around $100 since the end of August, based on the market price. At the same time, trading will begin on a split-adjusted basis on August 31st.
Apple is currently the biggest FAANG company, with more than $1.6 trillion in market capitalization. Since it continues to be one of the most profitable companies in the US, investors’ interest had remained elevated over the years, contributing to a strong rise in stock valuation.
Stock splits enable more investors to buy
After a stock split, investors are able to buy shares and gain exposure to a big company while paying a lower price. As the market volatility remains elevated, Apple and other tech companies are trending, especially now that the COVID-19 pandemic had favored the technological industry.
Considering the AAPL stock price will be around $100 at the end of next month, investors and CFD traders will be able to trade with it at a lower price. Due to elevated market valuations, the stock is not attractive for investors with limited capital available.
Does that mean demand will definitely increase since August 31st? Not necessarily, because future demand depends on numerous factors, and stock splits are not generating significant changes, as previously mentioned. Earnings, over-extended valuations, the pandemic, economic and political factors are expected to have a meaningful influence on the US stock market moving forward. What do you think about the Apple stock split? Does it come at an appropriate time for retail investors?