It’s a Good Idea to Buy Amazon Stock Before the Share Split

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  • Amazon (AMZN) stock was considered too expensive by some investors, but that’s about to change.
  • Share repurchases could boost the stock price, and indicate that the company’s executives are confident.
  • Investors should take advantage of this opportunity before Amazon shares move higher.
Closeup of the Amazon logo at Amazon campus in Palo Alto, California. The Palo Alto location hosts A9 Search, Amazon Web Services, and Amazon Game Studios teams.
Source: Tada Images / Shutterstock.com

It’s the 800-pound gorilla in the room whenever people discuss the world’s most important e-commerce companies. Amazon (NASDAQ:AMZN) is both a king and a kingmaker among online retail businesses, and AMZN stock has been a huge winner for at least a decade.

Don’t misunderstand — not everyone has cheered the meteoric rise of the Amazon share price. Some folks might say that the stock has gotten too expensive, especially after the onset of Covid-19.

You don’t have to let the skeptics dissuade you from making a sound investment, though. Betting against Amazon has been an unwise decision – and some new developments will only bolster the bullish thesis.

AMZN Amazon $3,382.16

What’s Happening with AMZN Stock?

Okay, so there’s no denying that a $3,000+ stock looks excessive, at least on the surface. If any company deserves a quadruple-digit price tag, though, it’s probably Amazon.

After all, this is a global behemoth of a company. Amazon’s plans for world domination are in full display, as the company is opening a massive, 15,600-square-foot sort center in Australia.

As the old saying goes, if you want quality, you’ll have to pay for it. Considering the company’s vast market presence, AMZN stock deserves to trade at $3,200, as it did recently.

Furthermore, Amazon’s trailing 12-month price-to-earnings ratio of 50.43 suggests that the shares aren’t ridiculously overpriced in light of the company’s profits.

Besides, some brokers will allow investors to buy fractional shares of AMZN stock. This already makes the stock more affordable for some traders.

Soon, however, a monumental event will likely bring many more prospective investors into the fold.

The Big Split

As always, InvestorPlace contributor Sarah Smith was timely and accurate with the buzz-worthy news. Reportedly, Amazon is preparing to enact a 20-for-1 share split.

Let’s not jump the gun here. Before this happens, Amazon’s shareholders will need to approve the stock split. In all likelihood, this will happen during Amazon’s annual meeting, scheduled for May 25, 2022.

If all goes according to plan, AMZN stock will start trading on a split-adjusted basis by June 6, 2022. It’s easy to imagine that a $160 stock will be more accessible, and therefore more popular, than a $3,200 stock.

This will be Amazon’s first share split since 1999, believe it or not. We all know what’s happened to the Amazon share price since 1999, don’t we?

In other news, Amazon’s board has authorized the company to repurchase up to $10 billion worth of AMZN stock shares. This suggests that the board is confident in Amazon’s ability to execute and stay profitable, at least in the near term.

Plus, share buybacks can help to keep a stock afloat. Remember, the stock market is basically a gigantic auction, and large-scale buying activity tends to lead to higher prices.

What You Can Do Now

People have been calling for Amazon to split its shares, and finally it’s about to happen.

This event, along with Amazon’s proposed share repurchases, is likely to provide a tailwind to AMZN stock.

Therefore, it makes sense to buy shares now – if you can afford them at the current price – in anticipation of higher prices in the near future.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/its-a-good-idea-to-buy-amzn-stock-before-the-share-split/.

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