Apple Reports Record March Quarter Results, Splits Stock 7-for-1, and Boosts Share Buyback

[Mousse]

Think of it this way though... if the stock price was $20 ($1000/50 shares) when you received your gift, who's to say you wouldn't have been tempted to sell at $50? That's a huge profit.
Or $100? That's a hard psychological number to not sell at, and already 5x profit.
$200?
At some point most people would have sold early on. Especially a gift, since it was not your long-term retirement account that you vowed no to touch.

If I had known that stocks WOULD increase I would have sold at $50. I would have been satisfied with any profit. It wouldn't bother me the least bit if it increased to $100 per share the day after I sold it, if I got a tidy profit.

But as I said, back then was on the brink of collapse. The clones were eroding their sales, ho-hum product lines, the possibility of no MS Office for Mac (back then Office was THE killer app). They could have easily been reduced to penny stocks and that bonus would have been worth a cup of coffee.

 

[pgiguere1]

Math major? Which college?

Do you genuinely think the divison part is what I struggled with and not the concept?

I've seen better attempts at being a smartass.

 

[FluJunkie]

There are some obscure Dow ETFs

The Dow Jones ETF SPDR sells is the third most-viewed ETF, after their S&P 500 and High Yield Bond ETFs. It's got 11 billion dollars in net assets and a an exchange volume of ~850,000 shares.

I'd have a hard time calling that obscure with a straight face.

 

[TallManNY]

Well again, I don't see a lot of interest in DJIA index funds, if only because such a narrowly focused fund would defeat the purpose of investing in index funds. Getting into the S&P 500 is a lot more significant, but of course AAPL has been there for a long time, as well as being the top holding in QQQ.

Do you think it's a given that AAPL goes into the DJIA? At some point, I suppose it could happen, once the committee decides to realign the index. But even so, this to me just illustrates the arbitrary nature of the index. It might have meant something before the advent of composite indexes, but what does this antique index mean today? That's my question.

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Exactly. A more general point is that out of the thousands of managed funds, few perform better than the broader indexes, and yet the managers rake off huge profits in the form of management fees. These funds don't go out of business because most investors in these funds don't understand how much they are costing them. The advent of the 401k made this problem even worse, as employers are signing their employees up for managed funds that return poorly.

Yes, I think it is a given that Apple goes into the Dow. I agree the Dow is a bit silly and also I may have overstated the amount of money invested in Dow tracking funds. But the folks who run the Dow really want their company (and jobs) to remain relevant. Not having the largest US company and the most recognized brand in the world being part of their index is not helping their relevance. From a layman's view, I can't see why the Dow wouldn't make every effort to get Apple in now that the stock price has been split down to a level where it doesn't mess up their precious index.

 

[IJ Reilly]

Yes, I think it is a given that Apple goes into the Dow. I agree the Dow is a bit silly and also I may have overstated the amount of money invested in Dow tracking funds. But the folks who run the Dow really want their company (and jobs) to remain relevant. Not having the largest US company and the most recognized brand in the world being part of their index is not helping their relevance. From a layman's view, I can't see why the Dow wouldn't make every effort to get Apple in now that the stock price has been split down to a level where it doesn't mess up their precious index.

I suppose you are right. I just have hard time believing that Tim Cook and the board are splitting the stock for that reason, which seems to be the emerging conventional wisdom for doing it. If listing in the DJIA was a real incentive, then why was GOOG split 2:1 instead of 10:1? Not a rhetorical question; I really have no idea.

 

[bawbac]

Yeah, but Apple is doomed.

No but the seam of the bubble are thinning.
With smart phones now close to saturation, not sure how they can sustain the iPhone sales.

 

[lilo777]

No but the seam of the bubble are thinning.
With smart phones now close to saturation, not sure how they can sustain the iPhone sales.

And to avoid the share price drop they not only need to sustain iPhone sales, they need to sustain iPhone sales growth because the stock is priced for growth.

 

[tgara]

Guys I am still confused by this 7/1 split.?? What should I do?

Lets say I have 15 shares now by June 2nd and the stock is at say $550 should I sell all my shares before the stock changes to what people are saying $75??

Or does my shares (15) increase x7? so = I will have 105 shares? and if I wanted to sell each share it would then = $75?


If someone could please help and give advice for those who already have shares what it means? should i sell before 2nd June or carry on holding?

Explain in detail please

Thanks

Let Tim explain it to you:

http://investor.apple.com/faq.cfm?FaqSetID=2

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7 for 1 split means that if you currently own 1 share of stock and the value is $700, then it becomes 7 shares with a value of $100 each. The total value of your shares remains the same.

Dividends will also be adjusted and are typically calculated as a percentage of the individual share price.

This is the best news I have heard in a while and something I have been waiting for for a long time. While it has no realistic change, the mental change can be huge, as individual investors would be far more willing to buy 10 shares for $500 vs 1 share for $500.

And awesome quarterly results.

Agreed, great quarter despite not hitting analyst expectations (which are somewhat of a guess anyway). I've been waiting for another split for a while now. I've got quite a lot of Apple stock, and made out pretty good after the 2000 and 2005 2-for-1 splits. After a split, you get a lot of shares at lower price for each, but over time, those shares increase in value.

This 7-for-1 split announcement is great! I've only seen a couple that were bigger than this, MasterCard most recently in a 10-for-1 split I think.

 

[IJ Reilly]

Agreed, great quarter despite not hitting analyst expectations (which are somewhat of a guess anyway). I've been waiting for another split for a while now. I've got quite a lot of Apple stock, and made out pretty good after the 2000 and 2005 2-for-1 splits. After a split, you get a lot of shares at lower price for each, but over time, those shares increase in value.

This 7-for-1 split announcement is great! I've only seen a couple that were bigger than this, MasterCard most recently in a 10-for-1 split I think.

They beat consensus EPS by 14%.

Shares don't increase in value because they are split. They increase in value because the company's earnings grow.

 

[FluJunkie]

And to avoid the share price drop they not only need to sustain iPhone sales, they need to sustain iPhone sales growth because the stock is priced for growth.

Apple's P/E suggests it's not particularly priced for growth.

 

[TallManNY]

I suppose you are right. I just have hard time believing that Tim Cook and the board are splitting the stock for that reason, which seems to be the emerging conventional wisdom for doing it. If listing in the DJIA was a real incentive, then why was GOOG split 2:1 instead of 10:1? Not a rhetorical question; I really have no idea.

Well I don't believe that this was to bring the little guy investor in so that he can buy a few shares for $100. That justification doesn't make sense to me.
But really there isn't any reason not to split the stock. It is only for some ego reason about having your stock price be larger than someone else's stock price (which is meaningless, obviously) that is keeping companies from splitting.

I don't think Goog would necessarily get invited to the Dow. Goog needs to start issuing dividends to be considered a little more of a mature company. Goog still seems a bit of a play thing for its owners. Apple might have had the same issue when Steve was around. The Dow is supposed to represent the strength of American industry. Goog is out there making strange, profit-free, products like Glass or driverless cars. All this might be too weird for the folks running Dow. But Apple is engineering, hardware, with very reasonable profits to price ratio and dividends to shareholders. It has a stability that I think will seem appealing to the folks at Dow in a way that Goog, and obviously Facebook and Amazon will not have.

 

[Urban Joe]

Please look up what fascism means and what its origin is.

Companies go private on a regular basis for a variety of reasons, but none of those have anything to do with fascism.

"Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities."

Source: http://www.econlib.org/library/Enc/Fascism.html

 

[IJ Reilly]

Well I don't believe that this was to bring the little guy investor in so that he can buy a few shares for $100. That justification doesn't make sense to me.
But really there isn't any reason not to split the stock. It is only for some ego reason about having your stock price be larger than someone else's stock price (which is meaningless, obviously) that is keeping companies from splitting.

I don't think Goog would necessarily get invited to the Dow. Goog needs to start issuing dividends to be considered a little more of a mature company. Goog still seems a bit of a play thing for its owners. Apple might have had the same issue when Steve was around. The Dow is supposed to represent the strength of American industry. Goog is out there making strange, profit-free, products like Glass or driverless cars. All this might be too weird for the folks running Dow. But Apple is engineering, hardware, with very reasonable profits to price ratio and dividends to shareholders. It has a stability that I think will seem appealing to the folks at Dow in a way that Goog, and obviously Facebook and Amazon will not have.

That explanation makes about as much sense as any is likely to. I don't buy the party line either.

The only reason to not split I suppose is the possibility of a falling stock price and the potential for delisting. You can never say never about that. I recall (painfully) shortly after the 2000 split AAPL falling into the teens and staying there for a long time. I wouldn't have taken much bad news to put them on the edge of a reverse-split.

The downside of them being in the Dow is that stocks in this index are value companies. I'd like to think that Apple can be a growth story again.

The wild part of the split for me is that it will take my cost basis down to under $1.00 a share.

 

[rdowns]

The wild part of the split for me is that it will take my cost basis down to under $1.00 a share.

Nice. Mine will be $1.61

 

[peterdevries]

"Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities."

Source: http://www.econlib.org/library/Enc/Fascism.html

I stand corrected and eat my words. I had the sequence of events and origin of the term different in my memory.

 

[IJ Reilly]

Nice. Mine will be $1.61

Kind of puts it all into perspective, doesn't it?

 

[FluJunkie]

The wild part of the split for me is that it will take my cost basis down to under $1.00 a share.

Yep. Mine will be a little over 99 cents per share.

 

[Urban Joe]

I stand corrected and eat my words. I had the sequence of events and origin of the term different in my memory.

Thanks for your feedback there. I agree with you that many companies do go private for perfectly legitimate reasons. However, given the current state of what we already know is going on in the USA the proposition that such a globally influential and powerful company such as Apple doing it definitely raises my eyebrows. Who would be financing the buyback and who would really be in control? Would we really know or would the truth be obfuscated behind a labyrinth of phony front corporations? I find the proposition of such a concentration of power quite disconcerting.

 

[TallManNY]

That explanation makes about as much sense as any is likely to. I don't buy the party line either.

The only reason to not split I suppose is the possibility of a falling stock price and the potential for delisting. You can never say never about that. I recall (painfully) shortly after the 2000 split AAPL falling into the teens and staying there for a long time. I wouldn't have taken much bad news to put them on the edge of a reverse-split.

The downside of them being in the Dow is that stocks in this index are value companies. I'd like to think that Apple can be a growth story again.

The wild part of the split for me is that it will take my cost basis down to under $1.00 a share.

Your cost basis will be delisted!!! Oh nooos!

Delisting is an issue for some of the momentum stocks and I think that is a reason for them not to split. Netflix (trading at 190 times earnings) could possibly lose 90% of its value. So they could split and then fall too low. Apple obviously has the huge cash reserves and such that would stop it from falling too much from this level. So delisting even after a large stock split just isn't in the cards.

I think it is to get in the Dow. Apple actually should be in the Dow. It has a position in American companies that is normally held by companies which are in the Dow. This is a easy correction that will realign Apple and a historical indicator. Being brought into the Dow will be a historic moment for Apple. It should be there with Microsoft, IBM and Intel.

 

[driceman]

No but the seam of the bubble are thinning.
With smart phones now close to saturation, not sure how they can sustain the iPhone sales.

Well, they haven't gone down yet. But it's not as though tech companies are going to suddenly plummet off the face of the Earth-make no mistake, they'll always find a way to get more money from people. This applies to Apple and all of its competitors.

 

[Kariya]

I remember when people were saying Apple was doomed when Google's stock price hit $1000.

Now its lower at $525 compared to Apple's $568.

Just goes to show...

 

[vomhorizon]

I remember when people were saying Apple was doomed when Google's stock price hit $1000.

Now its lower at $525 compared to Apple's $568.

Just goes to show...

Google's stock price is lower because they split the stock..

 

[aaronvan]

7-for-1 is a good split. The lower share prices will make the stock much more attractive to smaller commercial investors.

 

[Kariya]

[deleted]

 

[HBP]

I hope Apple's stock continues to rise before the split.

Anyone care to drop some knowledge about what happens to the share price around the time of the split?