Should Apple (AAPL) Split Its Stock?

After a blowout 2019 in which Apple (AAPL) stock surged 86%, earning the title as the Dow’s best-performer, the iPhone maker is on track again for an impressive 2020. But is it now time for Apple to consider another stock split?

Apple is once again the largest publicly-traded company in the U.S., reclaiming that status from Microsoft (MSFT). Apple’s 2019 stock performance has been due to a combination of factors, including strategic product releases and its well-timed stock buyback strategy. These moves, which has served the company well over the past several years, has allowed driven Apple to outperform the S&P 500 index over the past decade. In this new decade, it’s already building up to be more of the same.

Apple stock closed Friday at $297.43, which when rounding up to $300, makes me think it’s time for Apple to split its shares. Apple has split its shares on four previous occasions. Generally, companies enact stock splits to make shares easier to buy for individual investors. The last time Apple shares split was in 2014 when Apple enacted 7-to-1 split. At the time, the shares traded at $655.90. The other three times Apple split its shares are noted below:

Based on Friday’s closing price of $297.43, Apple shares are valued at 2014 split-adjusted price of $2082.02. CEO Tim Cook in 2014 had then noted that one of the reason for splitting the stock was that he wanted the shares to become more accessible to a larger number of investors. In the end, however, splitting a stock does nothing for the overall value of a business. But now that the stock is near all-time highs, it makes sense for another 2-for-1 split.

The lower share price of $150 after a 2-for-1 split may entice more buying among would-be investors, particularly those who prefer larger number of shares. And if those would-be investors were unwilling to shell out the cash for stock trading at $300, Apple at $150 will appear more affordable. I expect the stock, which is viewed favorably on Wall Street (80% of analysts rates the stock a Buy) to continue to rise this year, especially as Apple is approaching a 5G super-cycle.

The rollout of 5G networks is expected to result in a super-cycle, with analysts expecting Apple to unveil an expanded lineup of iPhones (likely five versions), driving Apple’s iPhone revenues to grow by over 10% in 2020. What’s more, Apple stock currently ranks as one the highest-priced components of the Dow Jones Industrial Average which is a price-weighted index.

After surpassing UnitedHealth (UNH) (priced at $289.54) Apple is second only to Boeing (BA) (priced at $332.76), which it is poised to surpass at some point this year on its way to becoming the most influential in the average. Gene Munster, analysts at Loup Ventures sees the stock rising above $400 at some point in 2020.

While Apple stock climbing to $400 would be good news for current investors and Apple, it’s worth asking, would it be good for Apple? Already the largest publicly-traded company on the market, becoming the most-influential on the Dow may invite pressure it doesn’t need. For these reasons, I’m expecting a stock split to be one of the topics Tim Cook will have to address at some point in the next few months.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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