Amazon Has Been Stuck In The Mud Since Its Pandemic Highs But Is The Stock A Buy Now
On March 9, Amazon announced a 20-for-1 stock split, the company’s first split since 1999 and its fourth since the IPO in 1997. Additionally, Amazon announced a $10 billion share buyback plan. The company’s shares have rocketed 4,300% since its last stock split announcement. Amazon’s stock price soared to all-time highs after the pandemic, but it’s been trading sideways to lower since. Do the shares have more pain ahead, or is Amazon stock a buy now?
Of course, you do not own more of Amazon because of the stock split. If you cut a pizza into 20 slices, you still have one pizza. With that said, lower share prices can equate to more pin action because of options contracts, and I think the company looks attractive here as a long-term investment.
In the video below, I break down the key fundamental highlights that will power Amazon over the next decade. I’ll also chart out Amazon’s price-to-sales ratio and provide an opinion on where I think the stock price is headed from here.
*Stock prices used in the below video were during the trading day of March 11, 2022. The video was published on March 11, 2022.
Why Amazon Is Splitting Its Stock
The news of Amazon’s intended split comes just a little over a month after Google’s parent company Alphabet announced a 20-for-1 stock split. Apple and Tesla both announced stock splits in 2020 four-for-one and five-for-one splits, respectively.
Stock splits the size of Amazon and Google’s have been very uncommon, says Howard Silverblatt, senior index analyst at S& P Dow Jones Indices. Companies used to routinely split their stocks to keep them at more affordable prices in the neighborhood of $60 per share but recently more firms haven’t bothered with this strategy. There are currently eight stocks in the S& P 500 that have a price of more than $1,000, and 15 more between $500 and $1,000, Silverblatt says.
But now companies seem to want to get back to a more manageable price for individual investors, especially since those investors can now buy fractional shares just a part of a share instead of the whole thing via trading platforms like Robinhood. Fractional shares are a demonstration of how individuals investors are investing today: They’re buying based on a specific amount of money they want to spend, rather than on number of shares like institutional investors do, Silverblatt says.
Companies with high-priced stocks like Amazon appear to be reacting to this trend and are trying to encourage investing with these stock splits, he adds.
Whether Amazon Stock Fits Into Your Portfolio
Amazons trading price has recently hovered upwards of $3,000.
» Need a broker? View our list of the best brokers for stock trading
That’s a significant investment for most people. Before you commit, consider:
How you’ll achieve diversification. Individual stocks are typically considered risky because they lack diversification if the company hits a rough patch, your portfolio will, too. To soften that blow, investors often turn to low-cost mutual funds like index funds to make up the bulk of their investment portfolios. These funds track a market index and invest in many companies in some cases, that includes Amazon which makes it easier to diversify your portfolio and lower your investment risk.
Your future investment plans. In general, it’s wise to invest on a regular basis. Theres even a name for this strategy: dollar-cost averaging. It means investing set amounts at standard intervals, rather than putting a lot of money into the market, or into a stock like Amazon, at once. Dollar-cost averaging can help ensure you dont always buy stocks or other investments at a high price.
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Amazon Share Price Momentum
Alphabet, Tesla, Apple, and Nvidia are far from their share price highs, but they are all up significantly since their stock splits. Meanwhile, Amazons share price is worth what it was in July 2020. And after sliding from $3,696 since 18 November to $2,910 today, pressure on the new CEO to arrest the slide remains intense.
And psychologically, retail investors and employees may be more likely to purchase the stock if they can buy multiple whole shares, rather than part-purchasing. In Amazons own words, the split provides more flexibility in how manage their equity in Amazon and make the share price more accessible for people looking to invest in the company.
Wedbush analyst Dan Ives believes even though they doesnt change the valuation, from an individual investor perspective, would make the stock less appealing.
Google Fair Valuation: $18 Trillion
FY21 “true” P/E closer to 25
At the current market cap of $1.42 trillion, I see GOOG as 23-50% undervalued, depending on how conservative I want to be.
Google earned $40 billion in net income in 2020 If we assume $10 billion in incremental earnings for FY21 between business growth and COVID rebound, and we separate out the $10 billion in losses between Google Cloud and Other bets, we see 2021 true earnings power of $56 billion or $80/share range.
Viewed this way shows Google with a forward P/E of ~25x rather than the headline 30xestimate. I believe this is a better way to view the company, and that the headline forward P/E estimates understates Google’s real earnings power.
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Open An Account And Deposit Funds
So now that you have a bit of background information about Amazon, you are now ready to take the next step. As such, we are now going to take you through the steps of buying Amazon shares online in the UK. While there are many suitable brokers to choose from, we have decided to show you how to invest in stocks with eToro.
This is because the FCA-regulated platform allows you to buy Amazon shares without paying any fees or commissions, and you can instantly deposit funds with a debit/credit card or e-wallet.
So, the first thing that you need to do is head over to the eToro website and open an account.
67% of retail investor accounts lose money when trading CFDs with this provider.
On top of choosing a username and password, you will need to provide a range of personal information. This will include your full name, home address, date of birth, and contact details.
You will also be asked to verify your identity. You can do this at a later date if you are not planning to deposit more than 2,000 . But, you will need to do this before you make a withdrawal. As a result, its best to upload the required documents now.
This will include your:
- Passport or Drivers License
- Recent Utility Bill or Bank Account Statement
You will also need to meet a minimum deposit threshold of just $50. Furthermore, with fractional share trading you can buy $50 worth of Amazon shares.
In terms of supported payment methods, eToro accepts the following options:
Find A Uk Stock Broker That Offers Amazon Shares
With Amazon now boasting one of the largest market capitalizations globally, it will come as no surprise to learn that lots of UK brokers now allow you to buy its shares. But, this isnt to say that all brokers are worth considering.
On the contrary, you need to spend some time looking at the types of fees and commissions the platform charges, what UK payment methods are supported, and crucially whether or not the broker is licensed by the FCA.
Taking all of this into account, below you will find some popular UK stockbrokers that allow you to buy Amazon shares online.
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When Is The Amazon Stock Split Date
One big question that many AMZN stock fans likely have is when is the Amazon stock split date?
According to the SEC filing, shareholders will actually need to approve the stock split first. They will have a chance to vote on it during an annual meeting on May 25, 2022. If all goes well, there will be a few other key dates to watch.
The first will be May 27, 2022, which will serve as the record date. That means if you want to participate in the stock split, you must own AMZN stock by May 27. Individual accounts will start to update to reflect the stock split by June 3, 2022. Finally, AMZN will start trading on what is called a split-adjusted basis by June 6, 2022. That is when investors will start to notice the lower share price.
How Much To Invest In Amazon
One of the most important considerations is how much money you can afford to put into Amazon stock.
The answer isn’t necessarily the same as how much money you have available. That’s because the stock market is considered a long-term investment, and financial experts typically warn against buying any stock with money youll need within the next five years.
Before buying individual stocks, it’s also wise to make sure you have an adequate emergency fund and that you’re saving for any important short-term goals.
With a stock price as high as Amazon’s, you might also be interested in fractional shares, which allow you to purchase a piece of a share based on a set amount of money you want to invest rather than the whole thing. Not all online brokers offer fractional shares, but the offering is becoming more common.
Whether you’re buying Amazon stock or shares in another company, the process is generally the same. Consult our full guide on how to buy stocks to learn more.
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Is A Stock Split A Good Thing It’s Complicated
As I’ve argued before, a stock split doesn’t change the total value of the company splitting its shares. One share of Amazon stock priced at roughly $3,060 has the same economic value as 20 shares priced at $153 . Some would argue, however, that investor psychology has a part to play, resulting in an underlying positive impact. While there’s some evidence to support that stance, there are also data to the contrary.
Over the past couple of years, there were a number of high-profile companies that made stock-split decisions that seemed to supercharge price gains in the wake of the announcements. Apple shares jumped 34% in the 30 days following its July 2020 revelation of its 4-for-1 stock split. Tesla made its announcement just weeks after Apple, detailing a 5-for-1 split. From the time of the announcement to the date of the stock split, shares soared 81%.
More recent data, however, seems to contradict that assertion. In conjunction with its fourth-quarter financial report, which was released after the market closed on Feb. 1, Alphabet announced plans for a 20-for-1 stock split. While shares initially spiked on the news, the stock has fallen roughly 3.2% since the announcement. Amazon shares appear to be reacting predictably, with shares currently up about 9.9% since the announcement late last week. Time will tell whether the move holds.
Based on the contradictory data, there’s no clear connection between the stock splits and the stock price movements.
Have Amazon Shares Ever Split
Amazon.com Inc., whose current market cap is $1.77 trillion, hasnt split its stock since 1999. It currently has one of the most premium priced stocks in the S& P 500 index at $3,488.24. Beginner investors can still gain exposure to this e-commerce giant by engaging in fractional share trading with trusted stock brokers such as eToro.
Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner.Academically, Kane holds a Bachelors Degree in Finance, a Masters Degree in Financial Crime, and he is currently engaged in a Doctorate Degree researching the money laundering threats of the blockchain economy.Kane is also behind peer-reviewed publications – which includes an in-depth study into the relationship between money laundering and UK bookmakers.You will also find Kanes material at websites such as MoneyCheck, the Motley Fool, InsideBitcoins, Blockonomi, Learnbonds, and the Malta Association of Compliance Officers.
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How Has Coronavirus Impacted Amazon’s Share Price
Since the stock market crash that started in February 2020, Amazon’s share price has had significant positive movement.
Its last market close was $2799.72, which is 25.14% up on its pre-crash value of $2095.97 and 72.18% up on the lowest point reached during the March 2020 crash when the shares fell as low as $1626.0318.
If you had bought $1,000 worth of Amazon shares at the start of February 2020, those shares would have been worth $951.42 at the bottom of the March crash, and if you held on to them, then as of the last market close they’d be worth $1,399.86.
Amazon Stock Price Up 255% On Friday
The Amazon stock price gained 2.55% on the last trading day , rising from $3144.78 to $3225.01. , and has now gained 5 days in a row. It will be exciting to see whether it manages to continue gaining or take a minor break for the next few days. During the day the stock fluctuated 3.58% from a day low at $3120.22 to a day high of $3231.88. The price has risen in 6 of the last 10 days and is up by 10.72% over the past 2 weeks. Volume has increased on the last day along with the price, which is a positive technical sign, and, in total, 1 million more shares were traded than the day before. In total, 5 million shares were bought and sold for approximately $16.38 billion.
The stockhas broken the wide and falling short-term trend up. Firstly a slower falling rate is indicated, but this may very well be an early signal of a trend shift. On the reaction, there will be support on the roof of the current trend broken, which is $3030.97, a level that may pose a second chance to hit a runner. According to fan-theory $3504.26 will be the next possible trend-top level and thereby pose a resistance level that may not be broken at the first attempt.
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Who Owns Shares In Amazon
There are many people/entities that own shares in Amazon. Jeff Bezos still owns a significant portion, whilst the senior directors and executives at Amazon all own a small portion of the companys shares. Entities such as Vanguard and BlackRock own significant amounts, as do other investment groups including Fidelity and Baillie Gifford. Warren Buffets company Berkshire Hathaway also has a large investment in Amazon.
A Look Back At Amazon
It’s been many years since Amazon last split its stock. In fact, the most recent division occurred in the previous century, with three stock splits in rapid succession between 1998 and 1999.
The first was a 2-for-1 split announced on April 27, 1998, that finalized on June 1. The second — a 3-for-1 split — was revealed on Nov. 19, 1998, and completed on Jan. 4. The most recent was another 2-for-1 stock split, announced on July 21, 1999, and completed Sept. 1. During the 17 months between the first announcement and the final stock split, Amazon share prices surged an incredible 763%, which helps explain the rapid succession of the stock splits.
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What Does Amazon Cfo Brian Olsavsky Have To Say About The Companys Relative Growth Slowdown From Q2 2020
On a call to CNBC reporters Amazons CFO said: Our customers are safe and healthy and ordering from us. And we know that therell be more vacations or be more mobility. Therell be things that probably people shied away from last year and thats all good. But it does tend to lead them to do other things besides shop. So were just adjusting our run rates in the, in the period that we see that happening.
Amazons revenue increased by 27% year over year to $113.08B. While this is a significant slowdown from Q2 2020, when sales soared by 41%, Amazon CFO Brian Olsavsky blamed the slight growth slump on the pandemic lockdowns.
How To Buy Amazon Stock
Amazon is not only one of the most successful online retailers, but its also one of the few trillion-dollar U.S. companies that offers stocks. Founded in 1994 by Jeff Bezos, the company offers an array of products and services to customers on a global scale. Bezos recently stepped down as CEO, with Andy Jassy slated to take his position. With its revenue and share price skyrocketing over the last few years, the companys growth rate has attracted both rookie and experienced investors. If you have specific questions about investing, try speaking with a financial advisor in your area.
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What’s Happening With The Amazon Union Vote
In early April 2021, more than 70% of Amazon workers at a warehouse facility in Bessemer, AL voted against joining the Retail, Wholesale and Department Store Union, according to the National Labor Relations Board . Less than two weeks later, the union filed an objection to the vote, arguing that Amazon had violated certain legal restrictions during the election. The union alleges that the company used tactics to intimidate employees into voting against unionization. In early August 2021, a NLRB official issued a 61-page recommendation that could lead to a second unionization vote.
Quick Gains From Amazon
If 2021 taught us anything, it’s that a good investment isn’t actually “good” until the market realizes it is.
So did investors who bought the Amazon dip last year make a good investment? In my opinion, absolutely. Amazon is a massive company with great growth potential, and it was far below Wall Streets price target.
However, it’s also true that investors who bought the dip last year didnt make any real gains. And unless Amazon presents us with some rock-solid growth prospects in the first quarter of 2022, I dont think buying AMZN in March will quickly convert into massive returns.
Amazon’s stock price seems to be more sensitive to e-commerce growth than it is to any of its other segments. And the performance of the retail industry this year is currently anything but clear. On top of ongoing supply-chain constraints and labor shortages, the war between Russia and Ukraine might make U.S. inflation even worse than predicted.
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