Apple - Stock Split Reaction
As Apple awaited a nerve wracking reaction to their stock split yesterday, the share price shot up almost immediately after the opening bell.
It’s hard to say we didn’t see this coming, but seeing these reactions unfold before our eyes surely requires quite the praise to the executive team in the Silicon Valley tech company. In fact, as Apple soars, investment bank Canaccord Genuity raises their target price to $145 and heavily reinforces their buy rating, which is grounded very firmly in good reasoning.
Though there are a myriad of reasons we can attribute the positive reaction to, we find that one of the most compelling (and intangible) reasoning is because of FOMO, or fear of missing out. Especially given the younger demographic of Robinhood investors, these young adults saw this as a golden opportunity to take a full stake in Apple. And despite the fact that stock splits don’t inherently change a company’s equity value, it’s clear that this stock split was ultimately the best move the Cupertino-based company could make.
In addition to the intangibles that analysts at Bank of America so boldly predicted, there are definitely other, quantitative factors that contributed to Apple’s rally post-split. For instance, the new iPhone 12 Pro now has an inflated purchase price, which BofA forecasted, would increase net profits by 10%.
In short, the fear of missing out on a great stock along with a new line of iPhones work in tandem to put wind behind Apple’s market capitalization.
Apple is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.
Disclosure: At the time of publication, I have no positions in any of the securities mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.