Apple's (AAPL) Upcoming Stock Split a Boon for This Industy

Apple (NASDAQ: AAPL) upcoming 7-for-1 stock split is not only seen as a blessing for shareholders but also an entire industry.

Nomura analyst Steven Chubak sees a tailwind for eBrokers from the Apple split and raised estimates accordingly. "... we see some trading tailwinds on the horizon, notably Apple’s recently announced 7-for-1 stock split to be exercised in June, which could provide a meaningful lift to eBroker commissions / PFOF revenue (notably in Options), which has not garnered adequate investor consideration, in our view."

Asking if "one stock impact option volumes that meaningfully?" Chubak said data suggests "yes." He explains, "AAPL options currently trade at a rate of 450K contracts per day, or ~3% of total industry volume, a meaningful contributor overall. Assuming retail clients trade the equivalent notional of AAPL contracts pre- and post-split, the number of contracts traded would rise 7x, and pro forma volume would increase to 3.15mn contracts per day (or ~18% of the pro forma industry total). This would translate into industry volumes rising to 17.7mn from 15.0mn (+18% growth), which should benefit the eBrokers more geared to options in particular (AMTD and ETFC)."

He sees the options activity post-split boosting TD Ameritrade's (NYSE: AMTD) and E*Trade's (NASDAQ: ETFC) earnings. "Assessing the revenue upside from the June stock split, our initial estimates indicate as much as +5% uplift to 2015E cons. for AMTD and +3% for ETFC; on a normalized basis, the contribution is less meaningful (+3% for AMTD and +2% for ETFC). While potential revenue upside from increased Options activity post the 7:1 split is not currently baked into our model, our analysis clearly suggests further upside to our trading estimates. In addition, we would expect increased single-stock trading in AAPL following the split, as the lower share price should help broaden AAPL’s retail investor base; this potential benefit is not contemplated in our analysis, but should provide further EPS support."

The timing of the split is quickly approaching. Each Apple shareholder of record at the close of business on June 2, 2014 will receive six additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on June 9, 2014.

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