Friday, June 17, 2011

Thoughts on an APPL 10-1 Split?

We will shift gears for a little while here while I build code for the next topic of "Option Volatility" and discuss a topic that is on a lot of traders minds...

AAPL needs to conduct a 10-1 split.....

I know this is a practice that is highly debated, so I wanted to spark some discussion here about the merits and drawbacks associated with such a move.

I found an interesting article AAPL P/E Ratio. Basically, Apple trades at a relatively low P/E ratio (~15 P/E) when compared to current growth companies like AMZN (~80 P/E) and NFLX (~70.58). Why??? AAPL consistently tops estimates and over performs on all metrics, while AMZN and NFLX rarely beat expectations.

My opinion :  AAPL is the MOST EXPENSIVE and CHEAP stock all at the same time.

It is CHEAP from almost every valuation metric (AAPL's PEG value is currently <1.... ~0.98), BUT.... it is EXPENSIVE in the sense that there is only a small market of individual investors who are willing to spend $330 dollars to get 1 share...

So how does AAPL save their distressed P/E ratio??

A 10-1 split, I would be willing to bet substantial amounts of money that if AAPL conducted a 10-1 split and moved the share price down to $33 dollars a share, that within 1 year it would be trading over $100 dollars a share....

What is their to lose?? That is where you come in.... Lets get a healthy debate going here.


  1. Maybe they do not want to look cheap?

  2. That is a good point. However.... Anyone who has recently looked into purchasing a Mac understands that this is not a "cheap" company. I know Steve Jobs have referenced Berkshire Hathaway in the past, and how he would like to have a 100,000 dollar share price as well (HAH!), but that will never happen for a number of reasons. Plain and simple, the split would send their P/E ratio to a more reasonable level (call it ~50 P/E), and more investors would be willing to purchase shares -- creating even greater market share per se.