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:
My take: Morgan Stanley does its research.
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.
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.
“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…