UPDATE 19/8/2020 19:00 GST: Apple has now crossed the $2 trillion mark.
Over its 44 year lifespan, Apple has been no stranger to groundbreaking historic achievements. From standardizing what we know today as the personal computer, to revolutionizing the music player and much more, the California-based tech giant has been at the forefront of tech innovation for decades.
Along with this success has come proportional monetary compensation – billions of dollars of it. In terms of financials, Apple has been the recipient of many an accolade as well. During the August of 2018, the iPhone maker became the world’s first publicly traded company to cross $1 trillion in market valuation.
Now, Apple is on the verge of making history once more, a stone’s throw away from a $2 trillion valuation. This comes after the company became the first US company to reach $1.5 trillion valuation back in June, following an exceptional year. Despite the ongoing coronavirus pandemic and previously falling iPhone sales (this rebounded in Q3, however, with 2% growth year-on-year), the company has managed to power through, simultaneously invigorating investors, many of whom are now staunch Apple believers. If the pandemic has taught us anything, it’s that tech companies are often the greatest winners in a socially-distancing world.
In fact, Apple’s Q3 2020 revenue was the highest it has ever reported for a third quarter, up 11% year over year.
Mac and iPad sales performance, for example, was buffed by the work-from-home trend, CEO Tim Cook told CNBC. He also said that about 75% of Apple’s retail stores are open around the world, noted a “very nice uptick” in users switching to iPhone from Android, partially driven by the iPhone SE, a cheaper $399 model released earlier this year.
This and other positive data from the quarterly report has triggered a notable post-earnings rally.
Apple stock has risen 55.44% so far since the start of the year, as of this writing. It’s current market valuation is tallied at $1.976 trillion, according to NASDAQ data.
However, investors were also motivated into action by the announcement that Apple will be conducting a stock split of 4-1.
As Investopedia explains, “a stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed.”
Apple wants to make its stock “more accessible to a broader base of investors,” as the stock split will drop share value but maintain the overall valuation of the company. This makes it easier for investors with less capitalization to be able to afford company shares.
Existing Apple shareholders (recorded as of August 24 at the latest) will receive three additional shares per each owned on close of business on August 28, 2020, and trading will begin on a split-adjusted basis on August 31, 2020.
As CNBC notes, this is Apple’s fifth stock split since it went public. It also split on a 7-for-1 basis on June 9, 2014; a 2-for-1 basis on February 28, 2005; a 2-for-1 basis on June 21, 2000; and on a 2-for-1 basis on June 16, 1987.
The key to $2 trillion for Apple will likely fall before or after the stock split takes place.
“If we see a pre-split rally like the one in 2000, then it will definitely be before, but it wouldn’t surprise me to see it happen right after the split,” Seeking Alpha writes. “In the end, Apple shares have been one of the year’s best performers, and investors are hoping they will continue to rally once the stock split goes through at the end of August.”