Here we go again. Amazon’s (NASDAQ: AMZN) had horrible earnings report, there are rumors again of an Amazon stock split. This is caused by the Nvidia stock split in May that caused the stock to rise over 35% since then. For almost 20 years I have been watching the stock market and one of my favorite tech companies to watch.
To be frank, I am also a customer and buy from Amazon all the time, so investing in Amazon stock makes a lot of sense to me.
Amazon’s stock price is now hovering at $3300, many investors are asking if will Amazon stock split? The short answer is that Amazon stock will not split anytime in the future because there is not a pressing issue or reason for it split such as being part of an index that requires a specific price. In addition, the recent sell-off in the tech sector makes it even more unlikely.
This is a serious question for small investors because of the nominal high stock price and bullish trend of Amazon stock.
We all love getting the inside edge, but right now I think an “Amazon stock split” is maybe 10% likely. The only reason why this would happen is if AMZN was put in an index where it required, which is currently not part of it.
Table of Contents
- 1 Retail Investors are betting that a split announcement would boost the stock.
- 2 Why would Amazon want to split its shares?
- 3 The unintended consequences of spitting shares
- 4 Recent history says no split is coming.
- 5 Why the Stock Split is Unlikely
- 6 Why do companies split their stock?
- 7 What happens when a stock splits?
- 8 Amazon Stock Splits In The Past
- 9 A brief history of Amazon and Jeff Bezos
- 10 Investor Attitude Toward Expensive Stocks vs Lower Priced Stock
- 11 Dow Jones Industrial Average Membership Not Much of an Incentive
- 12 Amazon’s Billion-Dollar Question
- 13 Break up of Amazon’s Divisions and Amazon Web Services
- 14 Charting Amazon’s subscription revenue
- 15 Bottom Line For A Amazon Stock Split
- 16 Amazon Stock Pivots
- 18 Amazon Stock Pivots
- 19 Amazon Stock 1 Day Moving Averages
Retail Investors are betting that a split announcement would boost the stock.
Speculation had also begun this week that the stocks would have split if it happened first in nearly 22 years. The deal was said Thursday and could be announced shortly after the start of the company’s earnings report. Investors who had invested well before the company started selling shares gained approximately 45.0%.
A split does not affect the value of a company or the values of shares that investors own. In particular, Amazon may be able to reduce its price per share and become a part of the Dow Jones Industrial Average, says Neil Macneale publisher of The Share Split Newsletter 2 for 1.
Amazon shares are the tenth most owned on Robinhood a popular app by small investors. An example of Amazon could be its entry into Dow Jones Industrial Average. The Dow is an en-grated index weighted as to the price – it will not admit companies with very high share prices because it deforms the weight-
Its shares have split three times all from 1997 to 1999 when it was searching for money and validation from Wall Hill. The broader stance would need to be much bolder, including a 10-to-1 cut to bring Dow prices closer to broader dow. It would be difficult to tell who will bring benefit.
Amazon shares rank 104th among all Robinhood shareholders, an app favored by small investors. Amazon’s main motivation could well lie in entering the Dow Jones Industrial Average. It will no longer admit high-ranked companies because of it distorts this rating. The company previously repurchased the shares at its highest levels. During its time with Wall Street Amazon felt pressure to buy investors. It could have considered something much bolder, like a 10-to-1 or 20-year split to bring its prices better on the other Dow component. Amazon holds more stocks than practically every stock of Dow’s stock except Apple and Microsoft.
Stocks splits make shares more volatile because shareholders more closely track price changes than percentage changes. Double the stock price affected its volatility from 20% to 30%. The more volatile the shares the more likely they will find their magic number on which they may exercise their right. According to analysts, given Amazon’s performance in recent years despite doubling the share price since 2019 it is hard think that executives are needed to launch such bogus rumor. To this end, company officers would be in favor of splits.
Recent history says no split is coming.
Amazon was an active stock-sharing company shortly after its public offering in May 1997. In June 1998 and the year that follows its public offering Amazon sold its shares for 1-for-1. This was followed by a split of 3 for 1 in January 1999 and another 2 for 1 in September 1999. Back then it is likely that Amazon will use its stock to buy acquisitions and that keeping its market cap as high as possible were strategically important. Amazon shares fell in the wake of the dot-com bust at $85 to under $65 within two years.
Why the Stock Split is Unlikely
Let me explain this more. In the past, market leaders, such as Exxon (NYSE: XOM) and Microsoft (NASDAQ: MSFT), split their stock when they reached above a specific cost per stock. A recent example of this Apple stock. However, in today’s world, Wall Street’s stock price theory is that the individual share prices are don’t seem to matter.
In fact, many popular stocks, such as Google, keep going higher. A stock’s share price is only relevant in certain areas of the Dow Jones Industrial Average. Investors today appear to be okay with investing in stock, whether it is about whether $10 share or $1,000.
However, to fully understand why I don’t think Amazon will split, you need to understand their past stock splits and history
Why do companies split their stock?
The two railway companies announced a split in January. In 2000 it had been 60 splits (or reverse divides). It was only 10 less than last year. Despite the announcement of their intention to split companies outperform the S&P 500 by an estimated 2.4%.
But such gains have dwindled recently. In the metric that represents the kind of muscle memory the market moves when a company is announced it is splitting a share. But stocks still hope splitting could cause an improvement in the pixie dust, says Morgan Stanley. The study included 450 companies that split over the last 20 years.
What happens when a stock splits?
With a split of two shares per single hold share, it will pay shareholders two to 1 share each. A reverse price split increases the prices per share for penny shares when they try to increase their perceived value or remain on the market.
This also takes the form of a reverse split by which the price of a penny will rise. The ratio in splits may look more like 2:1 or 4:1 or 8 : 1 (and sometimes even higher.) The total value of position remains the same but because of the splitting of the share, it has a different split of share parts.
Share prices would rise to $50 based on stock splits of the company at a $100 share price and 50 million pending shares. The market share cap continues as previously described however the share price has been halved. Forward stock splits have a lower cost than buying and holding a single share.
Amazon Stock Splits In The Past
A few may remember that Amazon’s stock (AMZN) was divided three times in its early days. When Amazon stock went public in 1997 it was $18 per share. Back then, it was believed that stocks would have better liquidity at a lower price; Jeff Bezos was very open to split Amazon stock.
In 1998 Amazon approached $100 per share and split it 2:1, and a few months later again. Lastly, they did it another split in 1999.
Unfortunately, the dot-com bubble blew up, and Amazon’s stock did not return its high from 1999 until 2009!
A brief history of Amazon and Jeff Bezos
Jeff Bezos was born in 1964 in Albuquerque. Amazon launched at Book Retail Store in 1995. In 1997 Amazon became public. Amazon buys the Twitch streaming site in 2014, for nearly $800 Million. Amazon also bought Whole Foods worth $13.7 billion.
In 2021 the CEO of Jeff Bezos announced that he will step down as CEO. Amazon is offering Echo home speaker and conversation bot Alexa for $79 per month in 2005. Amazon Prime allows subscribers to get faster delivery at a fee up to $79 per person per week. Amazon is the largest online retailer.
Investor Attitude Toward Expensive Stocks vs Lower Priced Stock
There has been a change of view since 1999. Today, stocks with four-figure nominal share prices still attract investors. For this reason, there is only one reason to split this AMZ – it is to be included in Dow Jones Index.
I won’t bet on Amazon splitting the stock. Microsoft, Apple, and Cisco are already on the index. The tech sector is already well-factored and represented.
Also, nothing fundamentally changes. After a 2: 1 split, the price cuts in half, but twice the available shares. So there is no change to the market cap.
And with changes to the rules on partial shares, small investors can buy a fraction of a stock that removes the need for companies to keep nominal share prices low.
Dow Jones Industrial Average Membership Not Much of an Incentive
Financial advisors and traders tend to look more at the S&P 500 index. Also, only three of the top 10 markets in the world are currently Dow Jones components.
Other companies refuse to split to meet Dow Jones standards, such as Berkshire Hathaway Warren Buffett (NYSE: BRK.A, NYSE: BRK.B). In a concession to shareholders, Buffett approved splitting 50: 1 on the B shares in 2010.
There is no connection between the A. shares. Alphabet (NASDAQ: GOOGL) avoids split, but only shares in its voting (GOOGL) and non-voting blocks (GOOG).
Amazon has shown similar attitudes to share splits in recent years. Both Berkshire and Alphabet have a little interest in becoming Dow stocks. I think Amazon feels the same.
Amazon’s Billion-Dollar Question
Amazon hasn’t marketed e-commerce to Africa although people in 18 countries worldwide can order Amazon online if they want. His corporate practices have helped to change how Africans think about the service provided by businesses. It has a limited geographical footprint but in Africa, it remains there.
Break up of Amazon’s Divisions and Amazon Web Services
The decision to separate storage and logistics businesses from the cloud and media services allows Jassy to focus instead on technology problem-solving. The decision would mean an expert would be appointed to deal with the trashing of the items discarded from the shelves.
Maybe this will sabotage Amazon Prime video but Firestick sat by and now is a doorkeeper for streaming services.
A split of AMZN’s shares would also be beneficial to AWS in the same way, as all the other major cloud companies like Apple, Microsoft. Amazon’s eCommerce platform could help to de-stress its market share. Amazon’s revenues are likely to increase.
Charting Amazon’s subscription revenue
Prime had been launched in 2005 by Amazon with over 150 million subscribers. Prime sets the bar for successful subscription programs. Bezos’ legacy is written in charts Bezos’ achievements in charting his rise in publishing.
Bottom Line For A Amazon Stock Split
The next few years will very exciting in Seattle. What bears sees as danger I see as an opportunity for AMZN shares. If there’s one legacy that Jassy is left to carry out, that will be the CEO of AWS, not the store. The disruption in Amazon shares would unlock both shareholder value and take the government off its back. Jassy is not Jeffrey Bezos. The legacy has been Bezos’s but Jassy won’t. Jasper didn’t make one. He is the author of Technology’s Big Bang: Yesterday today and tomorrow with Moore’s law.
There doesn’t seem to be a strong enough reason for Bezos or Amazon to answer “Yes” to split the stock.
The past may haunt Amazon.
They were happy to do it at the peak of the dot-com area, but the company spent years recovering. Amazon’s stock and market share continue to grow without a split.
The world has changed.
Twenty years ago, no one paid $5 for coffee; not people line up every day at Starbucks. People are now are less concerned about stock prices. Many small investors can buy fractions of shares on apps like M1 Finance.
The Dow Jones is overrated.
Companies don’t need to be in the index to succeed or attract investors. Most financial professionals are looking at other indexes.
Amazon stock is an excellent value and a great company. I believe Bezos will continue to focus on the core business rather than getting in the Dow.
Amazon Stock Pivots
Amazon Stock Pivots
Amazon Stock 1 Day Moving Averages
|Exponential Moving Average (10)||3434.62||Sell|
|Simple Moving Average (10)||3465.74||Sell|
|Exponential Moving Average (20)||3487.34||Sell|
|Simple Moving Average (20)||3547.12||Sell|
|Exponential Moving Average (30)||3492.45||Sell|
|Simple Moving Average (30)||3548.11||Sell|
|Exponential Moving Average (50)||3465.86||Sell|
|Simple Moving Average (50)||3465.05||Sell|
|Exponential Moving Average (100)||3390.27||Sell|
|Simple Moving Average (100)||3360.18||Sell|
|Exponential Moving Average (200)||3251.6||Buy|
|Simple Moving Average (200)||3270.8||Buy|
|Ichimoku Cloud Base Line (9, 26, 52, 26)||3536.42||Neutral|
|Volume Weighted Moving Average (20)||3530.31||Sell|
|Hull Moving Average (9)||3311.8||Buy|