Stock Splits: Win or Die Trying

Apple is in an epic drag race with Amazon.

It’s a race of historical significance, too.

At stake is the title of “first trillion-dollar company in world history.”

As it stands right now…

Apple is winning by a score of $788 billion to $494 billion.

The $304-billion differential could be the result of Apple’s 7-for1 stock split three years ago.

Let me explain…

Apple’s stock has split four times since the company went public:

  • The stock split on a 2-for-1 basis on June 16, 1987.
  • The stock split on a 2-for-1 basis on June 21, 2000.
  • The stock split on a 2-for-1 basis on Feb. 28, 2005.
  • The stock split on a 7-for-1 basis on June 9, 2014.

Yet Amazon’s stock has split only three times since going public:

  • The stock split on a 2-for1 basis on June 2, 1998.
  • The stock split on a 3-for-1 basis on Jan. 5, 1999.
  • The stock split on a 2-for-1 basis on Sept. 2, 1999.

By virtue of its ambitious 7-for-1 split three years ago, Apple strategically made its shares much more attractive to investors. (The perception of being cheap has a psychological impact on investors.)

Now it’s Amazon’s move.

With shares running north of $1,000, will Amazon steal a page from Apple’s playbook and announce a similarly aggressive split? And if so, should you front-run the announcement?

The timing for a major split to happen feels perfect.

So I asked my senior analyst, Martin Hutchinson, to unpack stock splits for us.

Hutch’s full analysis is below.

Ahead of the tape,

Louis Basenese
Chief Investment Strategist, Wall Street Daily

Martin Hutchinson interview

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