Apple (stock symbol, AAPL) is the current darling of the investment community, phenomenal growth over the past 10 years fueled by the launch of the iPod, iTunes the iPhone and finally the iPad have caused Apples stock price to reach stratospheric levels.
But should you invest in Apple stock right now? To answer that let’s take a closer look at the company and it’s performance over the past few years and the outlook going forward.
What is Apple Stock worth Today?
With a market capitalization of around $500 billion (more than the GDP of Poland) Apple is currently vying for the title of the largest company in the world (in terms of market cap) with petro-chemical giant Exxon-Mobile.
Apple’s current share price is around $530 making them one of the top 20 most expensive stocks traded in the U.S. Still a bargain compared to Berkshire Hathaway, but well beyond the scope of most small investors. This is the reason many investors are hoping for a stock split in the near future.
Apple Stock History Chart
Apple Stock Price History
There are few companies with the kind of following that Apple has, in some ways they’re more like a religion. This hasn’t always been the case however, especially with Wall Street; the company was distinctly out of favor in the mid nineties and reported heavy losses in both 1996 and 97. When Michael Dell was asked what he would do with Apple in 1997, “shut it down” was his curt reply.
Only with the return of Steve Jobs in late 1997 did Apples fortunes start to recover. A number of innovative new products were launched in quick succession, including the iMac, iBook and Power Mac G4 all of which used Motorola processors.
On the day Steve Jobs returned to the company as chief executive, Apple’s (AAPL) share price was trading at around $21.81. In the fifteen or so years since, they’ve risen over 9,200%. That means if you bought 100 shares in 1997 for $2,187 your investment would be worth over $200,000 today.
Apple Stock Split History
Apple stock has been split 2:1 three times in its history. The first stock split took place on June 15th, 1987 whilst the stock was trading at $78.50 and closed at $41.50 the day after, realizing a gain of 5.73% per share.
The second split took place on June 21st, 2000 whilst the stock was trading at $101.25 and closed at $55.63 the day after, realizing a gain of 9.89% per share.
The final stock split took place on February 28th, 2005 whilst the stock was trading at $88.99 and closed at $44.86 the day after, realizing a gain of 0.82% per share.
When Will Apple Stock Split Again?
Deciding when and if to split the stock is a matter for the Apple board. Although it’s known that the board thinks the current price is too high and will put off many potential smaller investors.
There have been rumors of a stock split taking place for the past few quarters but none has materialized. If a split does take place it’s likely to be a 4:1 split which should reduce the price to a much more manageable $125 per share.
One thing’s for sure, if current growth rates continue and Apple keeps releasing innovative products, a stock split in the near future is a certainty. I can’t see Apple stock trading above $600 for long.
Does Apple Stock Pay a Dividend?
Apple does not currently pay dividends on its common stock; they have paid dividends in the past and may do so again in the future, especially since they currently sit on a cash pile of over $100 billion. But there have been no public announcements to that effect and you should look on Apple as a growth stock.
Should You Invest in Apple Stock?
The value of Apple stock has become so great that you’re unlikely to see the massive growth that’s been achieved in the past. Apple would need to launch products as innovative as the iPod, iPhone and iPad all over again and keep doing so for many years to achieve that level of growth.
But with product evolutions and a few surprises along the way Apple is a good bet for moderate future growth. The smart phone market is a long way from maturity and Apple is in a prime position to capitalize on it. Similarly the tablet market has a long way to go and they’re showing no signs of slowing down on iPad development.
So, should you invest in Apple stock? The answer is possibly, Apples share price is currently relatively cheap compared to other Silicon Valley giants like Google or even Facebook. The problem is their size, when a company reaches $500 billion in market cap it can cause the share price to do some pretty strange and unpredictable things.
The reason for this is due to the fact they make up such a large percentage of the S&P 500, which is seen as a barometer for the overall U.S. economy. So when bad news affects the markets the S&P 500 takes a hit and therefore so does Apple, even if they don’t deserve it.
The problem for Apple is they’re just too big and when you get that big there’s no where to go? If you apply normal investment criteria Apple looks a good bet, but when you take into account their size and dominance of the S&P 500, you have to think that you might be in for a rough ride.
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