There was a lot to like in Apple's (AAPL 0.74%) blowout quarterly report on Thursday afternoon, but the meatiest morsel out of the tech bellwether is that it will execute a 4-for-1 stock split at the end of next month. It's a move that could prove to be contagious among its fellow giants.
All nine of the companies with the largest market capitalizations have price tags in the triple digits or higher. The lofty price tags obviously haven't gotten in the way of market-thumping gains in the past, but what do you think will happen now that the world's most valuable company is going the stock split route? Don't be surprised to see other high-priced market darlings follow suit in the coming weeks and months.
A stock price is just a number
It's been six years since Apple's board authorized a stock split. Its fellow tech behemoths have held out even longer. Alphabet (GOOG -1.31%) (GOOGL -1.42%) also rolled out a stock split in 2014, and it was a controversial move as it simply issued a new class of non-voting stock to protect its insider stock's class with superior voting rights. You have to go back to 1999 -- just before the dot-com bubble burst -- to find the last time that Amazon (AMZN 0.37%) executed a split.
If Apple, as it approaches a $400 price point, thinks the time is right to orchestrate a stock price closer to $100 to make it more accessible, why wouldn't Amazon and Alphabet, with four-digit price tags, follow the market cap leader?
A stock split is a zero-sum game. Whether you eat a pizza whole or cut it up into slices, you're still consuming the same number of calories. However, there was a time when growth stocks would routinely split their stocks as they approached the high double digits. Publicly traded companies wanted to make their shares accessible to a larger base of buyers in round lots.
A lot has happened to make stock splits less important these days. The race to zero among online brokerage commissions makes it cheaper than ever to buy a small number of shares. A growing number of brokers are now letting investors buy fractional shares. It's also become a badge of honor to have a high price tag on your stock. Well done, Warren Buffett.
However, seeing Apple stock react favorably to Thursday's after-market split news suggests that investors still like this seemingly abandoned art form. Back when stock splits were all the rave, they suggested optimism, as a company wouldn't deliberately slash its per-share price unless it felt it would be moving higher in the future.
Stock splits didn't slow the FAANG stocks before. Alphabet would go on to nearly triple since its 2014 split. Apple has gone on to more than quadruple. Amazon is a 50-bagger since its 1999 split.
Apple made PCs, laptops, smartphones, tablets, and more recently, smartwatches cool. It's about to make stock splits cool, again.