Katy Huberty: Apple's 4:1 stock split won't be a sell-the-news event

Apple begins trading on a split-adjust basis Monday. Morgan Stanley's charts illustrate what happened before and after Apple's four previous splits.

From a note to clients that landed on my desktop Friday morning:

Historically, Apple shares have outperformed the S&P 500 by over 2100bps in the 3 month lead-up to the split date, with outperformance this year reaching a record of 4390bps. In the 3 and 6 months following past stock split, Apple shares have also outperformed the S&P 500, albeit by a lesser degree - by a median of 700bps and 610bps, respectively (1). The most significant post-split outperformance came in C2H14 after the 7-for-1 stock split (2), although this period also coincided with strong outperformance of the iPhone 6.

Following Apple's 4-for-1 stock split, we'd expect near-term retail demand for Apple shares to increase, especially given the current market environment (retail traders have accounted for up to 25% of stock market activity during the pandemic vs. 10% in 2019, although we'd note that retail investors have already been able to buy fractional shares, so the overall retail impact may not be as overwhelming as some perceive.

Nevertheless, we don't believe the stock-split will be a "sell the news" type of event among institutional investors given the increasing expectations for the fall iPhone launch, and therefore the increase in retail demand following Monday's stock split is more likely to be a positive catalyst for Apple shares, in our view.

As it relates to index or flow related implications, we don't believe there will be a significant impact since most market benchmarks are market cap-weighted, and therefore are unaffected by the stock split. However, there is the potential for minor flow adjustments to index funds tracking the Dow Jones Industrial Average given the DJIA is one of the only price-weighted indices.

Maintains Overweight rating and $520 price target. 

Cue the charts:

apple before after split

apple before after split

My take: Morgan Stanley does its research.


  1. Paul Brindze said:
    My read of charts is slightly different.

    Long term Apple is a hold. No surprise to anyone here.

    Short term history says 1st day is rise and, starting 2nd day , the next week to month is buying opportunity.

    Other change since prior splits is tendency toward bigger swings due to increase in algo computer trading and end of down tick rule.

    August 28, 2020
    • Romeo A Esparrago Jr said:
      My interpretation also, Paul.
      If my son was keen looking into maybe buying a few AAPL shares,
      I’d advise him (and only him LOL) maybe buy last month to maybe even up to next 3 months based on Katy’s charts.
      Too bad he doesn’t have the dinero so it may be up to mE. Risk Taker! LOL.

      August 28, 2020
  2. Rodney Avilla said:
    Ms Huberty is noting associations between shares split and stock performance. Statically speaking, ‘association’ and ’cause and effect’ are not the same. We want to know if there is any cause and effect. That would be impossible to determine from the charts without knowing dates and all the other factors that affect stock price (revenues, new products, etc). If you were able to take all those other factors out of the equation, then, and only then, would we be able to see cause and effect.

    August 28, 2020
  3. Gregg Thurman said:
    I interpret Katy’s charts as being an examination of AAPL’s performance against one possible influencer, that being a stock split.

    August 28, 2020
  4. David Baraff said:
    @JoeBland: (off-topic, but related to something you said in the previous article):
    “As predicted AAPL was forced under $500 today.”

    Why was this predicted? I know that August 21st was a monthly options expiration, and while today was an expiration as well, it was not a monthly, but a weekly expiration, which doesn’t have as much riding on it. Was the force under $500 you’re talking about something you think was due to options, or did you think it has something to do with the split?

    In my opinion, the “strength” of this effect (for options) is proportional to how “important” the expiration date is. For example, January expirations are the most important as they attract the largest volume of options (LEAPS) etc, followed by quarterlies, then monthlies. But weeklies are, well, pretty weak…

    August 28, 2020

Leave a Reply