It’s easy to be bullish on Amazon (NASDAQ:AMZN). Amazon stock is up nearly 70% in 2020, and it’s likely that the stock will climb even higher. In fact, at one time, shares of the e-commerce giant were changing hands at over 85% the price its shares were at on the first trading day of this year.
It’s not hard to understand why. The novel coronavirus pandemic has been the catalyst that is propelling e-commerce to a new level. Millions of Americans were already shifting the focus of retailers away from Black Friday toward Cyber Monday. However the pandemic created a catalyst that allowed those same Americans, as well as the uninitiated, to become completely comfortable having everything from grills to groceries delivered to their doors.
I’m of the belief that consumers didn’t need much of a shove. Even before the pandemic, America was becoming a less social country. In that sense, the pandemic just made many citizens more of what they already were.
And Amazon has been a beneficiary of this trend. In fact, if it’s possible, Amazon was actually caught unprepared for the scope of the pandemic. But despite any supply chain difficulties, there’s probably no better example of an essential business throughout the pandemic.
Will the Government Target Amazon?
That’s not to say Amazon doesn’t have its detractors. In fact, Jeff Bezos is probably grateful that a couple of the other FAANG stocks namely Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL) along with Twitter (NYSE:TWTR) are diverting the government’s attention.
And in a Biden administration, the anti-trust rhetoric will probably quiet down. Or will it? Thousands of small retailers are not going to survive the pandemic lockdowns. And given that many of them could not match Amazon’s e-commerce efficiency, I imagine there will be more than a few raised eyebrows at a company with a $1.6 trillion market cap.
But nothing could say we’re a good corporate citizen like a well-timed stock split. Will it happen? It doesn’t seem likely, but I believe it would be the right move.
Perception Makes for Good Public Relations
Amazon doesn’t need to split its stock. As I write this, Amazon stock is still the second most popular stock above $100 on Robinhood. It could simply be that Jeff Bezos is content to let the retail investors buy his company’s stocks a few crumbs at a time.
But – and forgive my understatement – this isn’t an ordinary time.
The wealth gap in the country is real and growing. Social inequality remains a part of the national conversation. At some point, it’s not unreasonable to think that a vocal minority will take “offense” to Amazon’s stock price, their Prime account be darned.
And if that happens, the opportunity will be lost. Because then the company’s split will only be seen as a cynical ploy to put themselves back in the good graces of investors.
But wait you say, investors will by cynical no matter when Amazon issues a stock split. That may be true. However there is a lot to be said for controlling the narrative. And that’s what Amazon will have the opportunity to do by pre-emptively splitting its stock.
Amazon Stock Is a Buy
I’m not predicting that Amazon will split its stock. In fact, there are many stock analysts who will argue that Amazon doesn’t need to, and shouldn’t, issue a stock split. That’s the thing about debates like this. There’s no right answer. Amazon doesn’t need the money. And right now, they may be content with leaving their stock in the hands of hedge fund managers.
I don’t know. It’s working for them this year. But then again, it would have been impossible for the country’s leading e-commerce company to not rise during a global pandemic that was making shopping from home a literal personal health issue.
So I’ll say buy Amazon stock as you can, even if takes you more than a year to buy a full share. And if you get a belated holiday gift of a stock split, reward the company and yourself by loading up on shares at the lower price.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.