Apple stock split: Should you buy now or wait?
(CNN) — Apple has grown increasingly dominant, and its stock is soaring to new heights. The company is aiming to make it easier for more investors to get in on the action with a stock split that will lower the price on individual shares.
The split follows a huge milestone for the iPhone maker — last week, Apple’s market cap surpassed $2 trillion. In the following days, that number has continued to climb to around $2.16 trillion on Monday, making Apple the most valuable stock in in history after passing Saudi Aramco’s record $2.03 trillion market cap peak, which it reached in December.
Apple shows no signs of slowing. Its highly anticipated 5G iPhone and opportunities in emerging markets are likely just around the corner.
Apple’s stock split process begins today after the closing bell. The company will make a record of current shareholders whose stocks will be split. Current investors will receive their additional shares after the closing bell on August 28, and shares will begin trading at the new, split-adjusted price on August 31.
Here’s what current and potential investors need to know.
To buy before or after the split?
The four-for-one stock split will not change the value of any investor’s total holding of Apple, it will just grow the number of shares making up that pot. So, if a potential investor has a set amount of money they want to invest in the company, it wouldn’t necessarily matter if they bought before or after the split.
Here’s an example: Assuming share prices don’t move dramatically during the several-day split process, if an investor owns two Apple shares at $500 each before the split (a $1,000 total holding), after the split they will own eight Apple shares at $125 each (still a $1,000 total holding).
The split is expected to make a difference for smaller, individual investors who may not be able to afford a share of Apple at $500 each (currently it’s cheaper to buy an iPhone SE than a share of Apple) but could afford the lower, post-split price.
As of Monday afternoon, Apple shares were trading around $505.
This is Apple’s fifth stock split since going public. And previous splits have been a hit with investors.
In June 2014, following a seven-for-one stock split, Apple shares were trading at $94. Within a year, share prices had grown nearly 37% to $129.
Can Apple keep growing?
Apple is already a behemoth, but many Wall Street analysts expect it to continue its dramatic growth.
Chief among the upcoming growth drivers is the 5G iPhone, which is widely expected to launch this fall. The new technology, which will allow iPhones to connect to the next generation of super-fast wireless networks, is a big advancement that could prompt a “super cycle” of consumers upgrading their devices.
“We believe iPhone 12 represents the most significant product cycle for (Apple CEO Tim) Cook & Co. since iPhone 6 in 2014 and will be another defining chapter in the Apple growth story looking ahead,” said Dan Ives, analyst at Wedbush Securites, in an investor note earlier this month.
The improved connectivity from 5G could also lead to greater adoption and use of Apple’s digital services, such as Apple Arcade and Apple TV+, which the company increasingly relies on to diversify sales.
Although expectations are high for the new releases, older and cheaper iPhones may also play an important role in Apple’s future, according to Morgan Stanley analyst Katy Huberty.
The company’s iPhone trade-in program provides it with used devices that can be re-sold, typically in emerging markets for a fraction of the price of new iPhones. In those markets, Huberty said, Apple holds a much smaller slice of market share than its global and developed markets positions — meaning it has significant room for growth.
Between the lower-priced iPhone SE and the forthcoming 5G iPhone, existing Apple device owners have growing incentives to upgrade old devices, growing the trade-in program.
Currently, Apple holds 8% market share in emerging markets, compared to 35% share in developing markets and 15% overall global market share. But by 2023, Huberty said she expects that around 70% of Apple consumers will participate in the trade-in program, which could boost Apple’s emerging market share to 15%, and its overall global market share to 21% in that period.
That would mean a larger installed user base for Apple, and likely more consumers of its digital services and other hardware products, such as AirPods.
“Apple’s used iPhone opportunity and the resulting installed base growth helps bolster the company’s long-term growth profile,” Huberty wrote in an investor note last week.
So, what does all that mean for potential Apple investors?
If you can afford it now, analysts think an investment in Apple will continue to pay off.
If not, Apple shares will be cheaper in a week and you can get in on it then.
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