Apple stuns Wall Street with seven-way stock split

Posted on by Mike Evans

Apple's 2014 Quarter 2 results were better than Wall Street expected: $45.6bn revenues, $10bn profit and iPhone sales leading with a 17 percent increase, despite a drop in iPad sales because of "inventory problems". But the shock came in the company's decision to go for an unprecedented seven-for-one stock split. Historically Apple has had only two stock splits, both at two for one.

This decision transforms Apple from a $500ish-per-share company into a more modest $70ish stock. The decision makes the stock more approachable, puts Apple in line for inclusion in the Dow industrial averages index and probably presages a growth in value. Tim Cook has admitted that Apple is currently undervalued and trades on a low-for-sector price/earnings ratio of 13.2. But it could also bring problems in encouraging more volatility as it attracts more short-term capital.

One thing, though. It is easier to imagine a $70 stock rising to $100 than a $500 share trading at $1,000. Now, with a single share costing little more than a Bluetooth keyboard, instead of a specced-out iPad Air, Apple is likely to be more attractive to small investors and this, in the short term, is a good thing.


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