Apple Computer Inc., whose shares have almost quadrupled in value in the last year on the success of its iPod music player, said Friday that its board approved a 2-for-1 stock split -- a move that sent the share price to another record closing high.
Shares of the Cupertino, Calif. company have been on a tear as iPod sales have soared with the introduction of less expensive versions of the music player. The stock has been the best performer in the Nasdaq 100 index and the wider Standard & Poor's 500 index over the last 12 months.
Apple also is one of the highest-priced stocks among the 30 companies that make up the computer technology index on the American Stock Exchange.
On Friday, Apple rose $2.85, or 3.6%, to $81.21 on Nasdaq, a record closing high. The stock reached an intraday peak of $81.99 on Wednesday. It is up 26% this year after rocketing 201% last year.
Apple's last stock split was in 2000, at the height of the technology boom. It had an earlier stock split in 1987.
Splits don't change the inherent value of stocks but tend to make an issue more attractive to small investors, who are often wary about betting on high-dollar shares. Splits may also indicate that management has confidence that earnings growth will be robust enough to keep the stock moving up.
But the high expectations indicated by a steep share price can mean that the company has less room for disappointment. For example, shares of Internet auction company EBay Inc., which topped $100 a share late last year, have lost about 20% since Jan. 19, when it reported earnings that were below Wall Street expectations for the first time in at least three years.
Chris Baggini, manager of Gartmore Growth Fund, sold Apple shares recently and said they were too expensive now.
"We are not a buyer yet," Baggini said. "We will be more interested in buying in the low 60s."
"The Apple phenomenon, while extremely strong, has a level of seasonality to it," he added. "That seasonality will negatively impact the company going into the first half of 2005."
Apple is trading at 40 times analysts' average estimate of earnings per share in fiscal 2005, which ends in September. By contrast, the projected 2005 price-to-earnings ratio of Hewlett-Packard Co. is 14; Dell Inc.'s P/E ratio is 25.
Apple's relatively high P/E doesn't deter some analysts.
"We continue to like the stock," said Pacific Crest Securities analyst Steve Lidberg. "The momentum behind iPod and the new Mac products continue to bode very well for the company to exceed expectations in the next several quarters."
Among the 26 analysts polled by Reuters, 15 rated Apple "buy" or "outperform," nine rated it "hold," and one had a "sell" rating. One analyst had no opinion.
Under the split, Apple shareholders of record on Feb. 18 will receive one additional share for every share held. Trading will begin on a split-adjusted basis Feb. 28. The company's total number of outstanding shares will double to about 800 million.