Amazon’s (AMZN) 20-for-1 stock split, which was announced in March, took effect on June 6. The stock rose about 2% to close at almost $125 on the first day of trading following the split.
Although Amazon is best-known for its E-commerce business, the company is also a market leader in cloud computing services. Amazon also makes hardware products, including Echo, a line of smart speakers.
Let’s analyse whether you should Buy more Amazon shares after the stock split.
What the Stock Split Means for Investors
Amazon shares were trading at about $2,800 apiece at the time the company announced the split, meaning the stock had been out of the reach of many retail investors. At about $125 after the split, Amazon shares have become more accessible to individual investors. Interest from retail investors is likely to provide an additional tailwind for the stock.
The split also opens the door for Amazon’s possible inclusion in the blue-chip Dow Jones (DJIA) index. By joining Dow, funds that exclusively track Dow components could now add AMZN to their portfolio.
Amazon Stock Split History
Amazon went public in May 1997 at the IPO price of $18. The stock has undergone multiple splits since the IPO. The first split of two-for-one took place in June 1998. The second split of three-for-one happened in January 1999, and the third split of two-for-one took place in September 1999. The latest split of 20-for-1 is the fourth for the stock.
Why Amazon Stock Deserves More Attention Following the Split
When a company decides to split its stock, investors often see that as a sign that the management is confident in the company’s future prospects. In Amazon’s case, there are several reasons you may want to get exposure to the stock after the split, which makes it more accessible to small investors.
Amazon continues to dominate the E-commerce sector, which still has significant growth potential. According to eMarketer estimates, global online retail sales will top $5.5 trillion in 2022 and rise to $7.4 trillion by 2025. Meanwhile, E-commerce sales are expected to account for about 25% of total retail sales by 2025, indicating a massive growth opportunity ahead.
Amazon controls the largest share of the global cloud market—a segment in which it competes with Microsoft (MSFT) and Alphabet (GOOGL). The cloud market is expected to continue to grow as businesses work towards modernizing their IT systems. The Cloud is Amazon’s most profitable business, contributing 178% of operating income in Q1 2022.
Meanwhile, during PRIDE month, some investors may be interested in getting exposure to companies with friendly policies and practices for the LGBTQ community. Amazon has strived to offer a favorable workplace for its LGBTQ employees, earning it a 100% rating in the Human Rights Campaign Foundation’s Corporate Equality Index.
Wall Street’s Take
On June 6, MKM Partners analyst Rohit Kulkami reiterated a Buy rating on Amazon stock with a price target of $180, which indicates 44% upside potential.
Consensus among analysts is a Strong Buy, based on 36 Buys, one Hold, and one Sell. The average Amazon price forecast of $180.13 implies 44.4% upside potential to current levels.
Stock Investors
TipRanks’ Stock Investors tool shows that investor sentiment is currently Very Positive on Amazon, with 4.2% of portfolios tracked by TipRanks increasing their exposure to AMZN stock over the past 30 days.
Final Thoughts
Amazon stock gives exposure to some of the most promising growth industries. Moreover, Amazon’s friendly LGBTQ policies could help it attract and retain valuable talent, investors, and customers. According to Credit Suisse estimates, global LGBTQ consumer spending is about $5.6 trillion. If the LGBTQ community were an economy, the bank says it would be the third-largest in the world.
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