Shares of Apple, Inc. hit a record high on Monday, ending the regular trading session at $129.04, up $4.232 (+3.39%), on strong volume of 225.7 million shares trading hands. That price gives the once-beleaguered Mac maker a market cap of $2.2 trillion, and comes as $AAPL began trading its 4:1 stock split.
For context for those who were following $AAPL before the stock split, Monday’s close would have been $516.16 per share before the stock split.
$AAPL Stock Split Means Nothing and A Little Something
Stock splits can be confusing, and the secret sauce for keeping it simple is that a stock split means nothing and a little bit of something. But mostly nothing. But please allow me to explain. Apple’s stock split 4:1 earlier in August, and Monday, August 31st, was the first day that this split was represented in the stock exchange itself.
The 4:1 stock split means that anyone who owned one share of AAPL before the split now owns four shares. At the same time, each share is worth just 25% of what it was worth before the split. So, you have more shares, but they’re essentially worth the same amount of dollars. That’s why I say it means nothing.
At the same time, a stock split can make a company seem more affordable and place investing in that company in the reach of more retail consumers (i.e. normal people like you and me). At $129 per share, $387 can buy you three shares of AAPL—or less than one share at $525 per share. That intangible barrier to entry has long been understood to have an effect on retail investors. But still, owning any amount of a company—say $1,000 of $AAPL—is still owning $1,000 of that company. How many shares
That said, institutional investors play an outsized role in buying and selling shares, but it’s nice that Apple’s board of directors thinks about smaller investors, too.
Other things that change include Apple’s earnings per share and dividend, both of which will now be measured at 25% of their former levels.
Why is $AAPL Rising?
If Apple’s stock split means nothing (mostly), why are shares of the company rising? As a corporation, Apple has so far ridden out the COVID-19 pandemic brilliantly, as have many tech companies. That makes Apple a safety-haven in the eyes of some investors, even while other investors are eyeing rumored future products, such as AR glasses and other devices. I personally suspect there’s some bandwagon jumping happening, too, as some segment of the investing class becomes worried they’ll miss out. $2.2 trillion is, after all, a lot of money.
That said, as much as Apple is worth as a corporation, it’s never been properly understood by Wall Street, and its price-to-earnings ratio (P/E) has long lagged behind other companies. Not everyone is convinced Apple has more hit products up its sleeve, either. Still, Apple’s P/E has climbed to 37.94, more than three times higher than the 11-12 it had for many years.