Irshadgul News report,
Amid the COVID-19 market catastrophe, the major technology companies that make up the FAANG family (i.e., Facebook, Amazon, Apple, Netflix, and Alphabet) are the talk of Wall Street. If one must say, tech market darlings, FAANG stocks are the core of the modern technology sector that delivers innovative technologies, products and services.
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Specifically, one of the FAANG companies that is renowned for its massive growth trajectory and rising earnings multiples, Apple Inc., ,Nasdaq: AAPL, have seen one Its share price gained 3.39 per cent and closed the day’s trade at US$129.04 on 31 August 2020 from the previous close of US$499.23 (pre-split price) on 28 August 2020.
Furthermore, on 1 September 2020, Apple share price closed the day’s trading session at US$134.18, up 3.98% from its previous close.
see; What’s up with Apple shares?
The increased price of Apple’s shares was attributed to the iPhone and Mac giant’s four-for-one stock split, which caught the attention of investors and noted the increased buying of Apple shares.,
It is worth noting that Apple’s market capitalization has grown to over US$2 trillion, and has overtaken Saudi Aramco as the world’s most valuable publicly listed company.
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Many questions must be arising in your mind that why the company did the stock split? How exactly does this 4-for-1 stock split work?
Let us look at each of these questions one by one.
stock split undertaking
Apple has opted for a stock split to reap more benefits by making its stock more accessible to a diverse range of investors.
Notably, Apple has done stock splits in the past as well, and most recently, it did so in June 2014 on a 7-for-1 basis. The recent 4-for-1 stock split was Apple’s fifth stock split since its listing in 1980.
effective dates of divestment
There have been three key dates this year:
Record Date – 24 August 2020 Determined which shareholders were entitled to secure additional shares due to the split.
Partition date – 28 August 2020 Represents shareholders whose shares were due to split after the close of business on that date.
Ex date – 31 August 2020 was established as of the date when Apple’s common shares traded at the new split-adjusted price on the Technology Bellweather Index and the Nasdaq Composite Index.
read; The Tech Boom and FAANG Stocks: Investors Look for Another Wave of Higher Stock Price Levels
The way a 4-for-1 stock split works
A 4:1 stock split ensured that Apple’s equity investors received three additional shares for every share held till August 24, 2020, In addition, shares of Apple officially began trading at the new split-adjusted price at the opening of the Nasdaq’s trading session on August 31, 2020.
Furthermore, Apple first announced its plan for a stock split on 30 July 2020 in its earnings report for 3Q FY20 ended 27 June 2020.,
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Apple’s financial performance
On 30 July 2020, Apple’s quarterly results for the third quarter ended 27 June 2020 were published, and the company reported strong revenue growth of 11 percent (pcp) to US$59.7 billion.
The increased revenue echoed double-digit growth in products and services as well as growth across all of its geographies.
In addition, Apple’s total net sales in the Services segment and Wearables, Home and Accessories grew to US$13,156 million and US$6,450 million for Q3 FY20, as against US$11,455 million and US$5,525 million, respectively, in Q3 FY19.
Following are some of the other highlights from Q3 FY 2020:
- Earnings per diluted share posted inflation of 18 percent and were reported at US$58.
- International sales comprise 60 per cent of Q3 FY20 revenue.
- Apple’s operating cash flow was US$16.3 billion.
- Total cost of sales for Q3 FY20 was US$37 billion, delivering a gross margin of US$22.7 billion on total net sales of US$59.7 billion.
- In addition, Apple’s board of directors declared a cash dividend of US$0.82 per share of the company’s common stock.
According to Apple CFO Luca Maestri, the company’s June quarter performance validated its ability to execute as well as innovate amid difficult times.
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