Is An Apple Stock Split a Primer for the Dow Jones Index?
Apple (NASDAQ:AAPL) may be considering a stock split, a move that could eventually lead to the company being included in the Dow Jones Industrial Average, Bernstein Research told investors in a note on Tuesday. The move will double the number of Apple shares, while halving their price.
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Analyst A.M. Sacconaghi wrote a split was also likely to help Apple get considered for inclusion in the 30-company index, adding that the company’s decision in March to pay its first dividend in 17 years made its entry even more likely. However, the analyst gave no reason for why the iPhone maker may take such a step.
“We see the timing as ripe for Apple’s potential inclusion in the DJIA following a stock split for several reasons,” Sacconaghi wrote. “Technology companies are under-represented in Dow…with IBM accounting for over two-thirds of the current tech weighting; a stock split would enable AAPL to be considered for Dow inclusion given that is a price based index; Apple’s recent introduction of a dividend is consistent with other Dow components, all of whom pay a dividend.”
There are five tech companies in the Dow at the moment: IBM (NYSE:IBM), Hewlett-Packard (NYSE:HPQ), Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), and Cisco (NASDAQ:CSCO). The index only includes two companies that trade for more than $100 per share, which are IBM and Chevron (NYSE:CVX). Apple was trading at $608 on Tuesday morning.
While the analyst admitted there was no catalyst for alterations to the Dow, he noted that since its last change there have been significant changes in the technology landscape. “None of the companies in the index currently have meaningful direct exposure to the global boom in smartphones and tablets (excluding the U.S. carriers),” he wrote.
Sacconaghi has an Outperform rating on Apple shares and a $750 price target.
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