Despite the fact that Amazon has announced a stock split, you can still get a share in the company’s stock. If you’re planning on acquiring a share, you’ll want to make sure that you understand how the split will impact your investment.
Amazon's post-split price would be well below that of HD or MCD
Several companies, including Google parent Alphabet and Amazon, have announced plans to do stock splits. These moves will make shares more accessible to retail investors, as well as give them more flexibility as they trade. However, these stock splits are superficial and do not have any real impact on the company’s fundamentals or valuation.
Amazon’s stock split will take place on March 9, and will result in a 20-for-1 transaction. This will mean that each share will have a new value of $120. This will make Amazon’s share price lower than Home Depot (HD) or McDonald’s (MCD) postsplit. Despite this, Amazon’s stock will still be worth more than $1 trillion. This makes Amazon a more likely candidate for inclusion in the Dow Jones Industrial Average, a price weighted index that measures stocks based on their price. The index has been constructed by the editors to mirror the broader economy. Amazon’s stock has soared over the years, and its ratios are higher than other retail industry leaders. Despite this, its share price has been range bound for the past year and a half. It is trading for more than $2,100 per share.
Amazon has announced a $10 billion share buyback program, replacing the $5 billion buyback authorization made in 2016. This will lower Amazon’s share count. Amazon also plans to file information with US Sec on May 25, 2022, in the form of an 8-K, regarding its split. The stock will also begin trading on a post-split basis on June 6.
The stock split has been a topic of speculation. It was sometimes discussed during the annual shareholder meetings at Amazon, but it had not been officially announced until now. Amazon has made three splits since its 1997 IPO. It has also announced plans to do another split in 2022.
It is not clear why Amazon is doing a stock split. However, analysts believe it is part of broader compensation changes at the company. Some conservative investors are concerned about the potential impact on the company’s future. However, the company’s stock has performed amazingly well over the years, and its long-term prospects are promising.
AMZN's post-split price would lower the consumer discretionary sector's weight in the Dow
Considering that the company is currently trading for more than $2,900 per share, the recent announcement of a 20-for-1 stock split is certainly a positive development. In addition to lowering the value of individual Amazon shares, the split would also increase the volume of shares being traded. This would help the company attract a large volume of retail investors, as they would be more able to purchase shares.
The stock split will also give more flexibility to Amazon’s employees. Amazon would be able to offer employees 19 extra shares for every share they own, and the shares will be priced lower than their HD price. The stock will also trade on a post-split basis.
The split could light up shares for a while, but Amazon would likely be hurt by higher inflation and a negative environment. The company is heavily reliant on international transportation of goods. In the first quarter, the company’s AWS unit saw double-digit growth, and its cloud computing business is growing rapidly. However, a stock split would also lower the consumer discretionary sector’s weight in the Dow Jones Industrial Average. The consumer discretionary sector includes Nike, Home Depot, and McDonald’s, among others. The Dow’s editors aren’t required to swap stocks within sectors. They instead construct the index to encompass the broader economy. The consumer discretionary sector would be impacted by Amazon’s inclusion, and the weighting of the overall average could be tricky.
Amazon’s inclusion would also change the weighting of the S&P 500. The S&P 500 is a widely used index that weights companies based on their market capitalization. The Dow Jones Industrial Average, however, is constructed using a price-weighted method. This means that the index isn’t built the same way as other major indexes. This means that the index may exclude Amazon, and it might include another sector at the expense of AMZN.
If Amazon’s inclusion isn’t approved, the company could end up being included in another barometer, like the Dow Jones Industrial Average. But that doesn’t mean that it would have a negative effect on the company’s future performance. In fact, it could extend Amazon’s recent streak of success.