The announced 7 for 1 Apple stock split will change the price of an individual share from roughly $525 to something around $75. More than wondering whether or not this is an opportune time to get into the stock long term, our equity traders are thinking that the stock might be significantly less attractive for short term trading.
Short term stock traders, like the ones at our firm, profit off of daily range. Under this new price the % change on a daily basis in AAPL will represent only 1/7th the price range that it did before the split. What was special about Apple was that it had a huge range and was still liquid enough to get a large amount of shares making it worthwhile to even the biggest traders.
The concern now is that the number of shares available will multiply by 7 making any large range price change harder. Even with $30 billion of stock buyback the float in AAPL is going to significantly expand. The expectation is that you would have to trade many more shares per position over a smaller price range in order to get similar outcomes. For short term traders this is not ideal as it dramatically increases the percentage of trading costs relative to return.
We will have to see how it plays out. If AAPL trades in a larger percent range than it did as a high priced stock then if may still remain of interest to short term stock traders. The expectation is that with the increased number of shares that price change will be slower and more stable. Maybe that’s what’s in play with this split. This could be the start of AAPL maturing from a fast paced growth company into a slower stable, dividend paying, blue chip. Time will tell.