From a note to clients by analyst Amit Daryanani that landed on my desktop Thursday:
All You Need to Know: Apple’s stock split has been cited as a catalyst for recent outperformance, so we think it is instructive to review performance prior to and following prior Apple splits. The recent split was the fifth Apple stock split with the other four taking place in 1987, 2000, 2005, and 2014. Notably, AAPL stock has outperformed the S&P500 by ~800bps post stock split – suggesting the momentum here should sustain (ex 2000 timeframe). More notably, in 2014 – when we had the confluence of an iPhone super cycle and stock split (comparable to this time?) the stock actually outperformed the broader markets by >16% vs. S&P500. The 180 days leading up to a stock split has typically seen significant outperformance, but this is unsurprising as high absolute stock prices is usually the motivation for a split. Apple has underperformed the S&P 500 just one time in the 180 days following a stock split.
Net/net: Apple has generally outperformed following previous splits and we think this trend should sustain as fundamentals continue to improve. While the current multiple is a premium relative to history, we think it is justified given: a) consumer staple narrative and b) high probability for double digit growth in FY21.
Maintains Outperform rating and $130 target.
Cue the spreadsheets:
My take: Morgan Stanley covered this last week. See Katy Huberty: Apple’s 4:1 stock split won’t be a sell-the-news event