That will change.
The dividend, which goes into effect on Monday, is a 20-1 transaction, meaning that if you own a share of Amazon, you will end up with 20 shares after the split, each costing about 1/20 of the previous price. So the value of your investment will not change, and an Amazon stock that trades for just under $ 2,450 will have 20 shares, each costing slightly more than $ 120.
Why is Amazon doing this now? Companies with sky-high stock prices often announce splits to make shares more affordable for retail investors. Google and YouTube owners The alphabet (GOOGL)It trades at more than $ 2,300 and has a market cap of about $ 1.5 trillion, which also approved a 20-1 split that will occur in July.
An internet retailer Shopify (Store) Then a 10-to-1 stock split is planned for June Tesla (TSLA) And meme stock darling GameDelete (GME) They have also begun to split their shares.
But here’s the thing: stock splitting can do that It seems As a stock is now more affordable, it does not make the stock cheaper when looking at valuation measures such as price-to-earnings or price-to-sales ratios.
After the split, Amazon is still worth about $ 1.3 trillion. The stock still trades at more than 150 times earnings forecasts this year, and nearly 2.5 times its estimated 2022 sales – significantly higher ratios and other retail industry leaders than the broader stock market. Walmart (WMT) And Aim (TGT).
Many individual investors who wish to own growth stocks, such as Amazon, Google and Tesla, are often forced to buy stocks (ie fragments of a stock) or exposure to these companies through popular exchange-traded index funds such as the SPDR S&P 500 ETF. Invesco QQQ ETF, which tracks the Nasdaq 100.
That’s why making the most accessible of four-digit share prices is a “smart move,” according to Michael Mullaney, director of global markets research at Boston Partners. This should allow more investors to buy company round lots (100 shares) instead of just a handful of shares.
“Retail investors’ business has increased dramatically over the last year and a half and is again very significant. It’s not just big corporations and hedge funds,” Mullaney said. “But it is impossible for the average investor to buy 100 shares of this stock at these prices.”
Professional investors are also getting attention. Amazon’s stock is up nearly 6% over the past week, as some shoppers may be looking to buy before the split takes effect. (Amazon is still down more than 25% this year.)
Stock splits for Amazon and Alphabet may serve another purpose: it may increase the likelihood that both companies will eventually be incorporated into the Dow.
That prestigious group of 30 major American companies is a price cap rather than a market cap weight index. So at their current share prices, Amazon and Alphabet were not added to the Dow, which would not have much of an impact on the index’s daily movements.
United Health (UNH)Turning in at just under $ 500 per share is currently the biggest weight on the Dow, after that Goldman Sachs (GS) And Home Depot (Cellphone Showroom)Each one trades over $ 300.
One of the main reasons why its high stock price Apple (AAPL) Not included in the Dow until 2015, several months after the stock split pushed its price down by more triple digits to less than $ 100.
So splitting up for Amazon and Alphabet could lead to those tech titans joining Apple and Microsoft, the only two companies in the US with more market value than Amazon and Alphabet.
Will inflation finally peak?
Big tech stocks are not the only inflated prices. Consumers and businesses have been dealing with rising prices of goods and services for the better part of the past year. Investors get another glimpse of how much higher prices have been raised when the US government releases its latest Consumer Price Index (CPI) figures on Friday.
Prices have risen 8.3% in the last 12 months ending in April. But that increase, while still stubborn, is the first drop in consumer inflation year-on-year since August. Consumer prices rose 8.5% in the 12 months ended March. So economists are hoping that the price level will go down in the next few months.
Even so, it may take a while for consumer prices to reach shoppers more comfortable … and the Fed. The Fed ideally wants to slow the CPI to 3% to 3.5% clip, if not lower, before declaring
A A win against inflation.
“The good news is that inflation numbers should start to decline,” said Ken Shinoda, portfolio manager at Doubleline. “The question is whether they get down enough?”
Monday: Amazon stock split. Apple’s Worldwide Developers Conference begins.
Tuesday: Gain United Natural Foods (UNFI), Smucker (SJM) And Casey General (Casey)
Wednesday: Gains from Campbell’s Soup (CPB), Brown-Forman (BFB), Allie’s Bargain Outlet (All right) And Below five (Five)
Thursday: European Central Bank Meeting on Interest Rates; US weekly unemployment rights; Gains from Neo (NIO), Signet Jewelers (SIG), Vail Resorts (MTN), Document Sign (DOCU) And Stitch Fix (SFIX)
Friday: Bank of Russia interest rates meeting; US Consumer Price Index; University of Michigan US Consumer Sentiment