$AAPL Hits 19-Month High on Home Automation Report

| Apple Stock Watch

Shares of Apple Inc. rallied to a 19-month high on Tuesday. Investors were cheered by a report from The Financial Times that said the company would launch a home automation platform at next month's World Wide Developer Conference. $AAPL closed at US$625.63 per share, a gain of $11.50 (+1.87 percent), on heavy volume of 12.4 million shares trading hands.

Apple last closed above this mark on October 22nd, 2012, at $634.03, the middle of a long decrease off of Apple's all-time closing high of $702.10 on September 19th, 2012. That retreat troughed in April 19th, 2013, when the stock closed at $390.53.

AAPL Chart

Chart Courtesy of Yahoo! Finance, Numbers by TMO

For the numberholics, $AAPL is up 60.2 percent in the 13 months since hitting that low, but is still off 10.9 percent from its all-time high.

Other factors involved in Apple's recent rally include a 7-for-1 stock split planned for June 2nd and tens of billions of dollars in stock buybacks and dividend that has been repeatedly increased. While the stock split has no direct effect on Apple's valuation, it appears to have fueled renewed interest in the stock. The stock buyback, on the other hand, has removed millions of shares from the market, helping to increase the value of the shares that remain.

Before the stock buybacks began, Apple has almost a billion shares outstanding. As of the close of Tuesday trading, there are 861.4 million shares outstanding. That gives Apple a market capitalization (market cap) of $538.9 billion, keeping Apple as the most valuable company on the planet.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

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Comments

skipaq

Viewed from a strictly mathematical perspective; it is true that Apple’s value won’t change when the 7 for 1 split kicks in. But it is also true that the news of this split has helped to send the share price up. That certainly has increased the value of Apple. You note this by saying: “Other factors involved in Apple’s recent rally include a 7-for-1 stock split planned for June 2nd…”

Let me put this in the form of a hypothetical: Without the split the current price would be in the $575-$599 range; but with the split it now stands at nearly $626. That is 4-8% higher valuation. While this is just a hypothetical; it does say the split news has increased Apple’s value.

When the news of this split broke I began looking at $600/share as a benchmark that the split has had such an effect. I also felt that $630 would represent a major effect. This has more to do with people’s feeling about this than the simple math of the split.

Bryan Chaffin

Hey Skipaq,

I’ve drawn this line because many folks think that a stock split means they will have MOAR.

This is a common misconception among retail investors. For the sake of understanding investing to the best of our abilities, however, I think it’s important to correct that misconception when possible.

It’s true that the effect of a stock split can have a positive or negative impact on a company’s value—and therefore the value owned by an investor—most splits, including Apple’s 7-for-1 split are value-neutral.

An exception to this might be Google’s most recent 2-for-1 split, where a new class of shares without voting rights were created to permanently Larry Page and Sergey Brin’s control over the company. Those new shares were effectively a new investment vehicle not directly tied to the voting shares. The AP has a nice writeup on that topic.

In any event, there is a difference between a stock split’s impact on valuation—there is none for Apple—and the effect a stock split might have on that valuation by influencing trading.

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