Apple’s first affordable product: its stock

Apple’s stock split may make shares more enticing to consumers

 

Apple Inc. is finally planning to reduce prices — but only of the price of one share of stock.

On Wednesday, the company AAPL -0.39%  announced a 7-for-1 stock split to take place in June. At current prices, that means one share of Apple stock will cost retail investors around $81 each, and experts say the cheaper stock price could attract a new generation of Apple-obsessed investors.

“I initially thought the stock split didn’t have much of a point,” says Will Strafach, an iPad and iPhone developer. “Anyone who didn’t have the spare cash to invest in Apple at the current price probably wouldn’t have enough to get enough shares after the split.” But he soon changed his mind after polling his 49,000 Twitter followers . “Some who don’t have cash for one share now want to buy in after the split as a symbolic gesture, and for others it seems to be about the psychology in regards to the lower pricing,” he says.

The stock split allows more people to become stakeholders and buy more products, says Scott Davis, chief growth officer at marketing consultancy Prophet. “The accessibility angle is both strategic and smart,” he says. “The constant beating of the drum from Amazon AMZN -9.52%  , Samsung KR:005930 -0.57%   and Netflix NFLX -3.76%   is forcing Apple to realize it no longer has the corner on breakthrough innovation and has to garner loyalists in different ways.” Despite the stock’s rocky road, he would rather own Apple shares than an Apple device. “There is unlocked value in Apple that has not been realized,” he says. 

MarketWatch has routinely asked the question: Is it better to spend your money on an Apple product or on an Apple share? When Apple’s shares reached a peak of $705 in September 2012, for example, it was enough to buy an iPad and an iPhone (with a two-year contract). Many analysts said they would still buy the share — not the devices — with price targets as high as $880. Last year, the shares plummeted to $500, roughly the same price as an iPad. Strafach preferred the stock then and now. “I definitely see the shares gaining much more long term value,” he says.

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Post-split, one share will be enough for an iPod Shuffle ($49) with plenty of change left over, but not quite enough to buy the $99 plastic iPhone 5C. At its current price, one Apple share is worth enough to buy a $499 16-gigabyte iPad Air. But while one share will cost less after the split, Apple gadgets will cost more, says technology consultant Jeff Kagan. “Apple is known as one of the best in the industry and its products are priced that way.”

When Apple did offer a cheaper product — iPhone 5C — to compete with Samsung’s range of cheaper smartphones, consumers did not react with the usual frenzy. Apple has always tweaked the price of its products with every upgrade, he says. By adding a retina display, it raised the price of its iPad Mini last year from $329 to $399. But Apple fans are almost unique in that they will pay more, but they are longing to be wowed again, says Louis Ramirez, senior editor at deal aggregator DealNews.com. “A new Apple TV with Siri voice integration might allow Apple to raise the price of that device,” he says.