Shares of Amazon.com Inc. rose by 3.1% on Monday after the company declared a split in the stock in a ratio of 20: 1. This is the first such move by Amazon in more than two decades.
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As per Bloomberg News, the first trading sessions saw the price rise to $126.18 and touched the highest level last month. The Amazon stock participated in the rally that broadly covered internet and technology companies after China eased Covid restrictions. The stock can further get support after the split as it becomes more affordable and attractive for investors. The announcement in March regarding the stock split by Amazon decision was to make it more accessible to retail investors.
Rohit Kulkarni, an analyst with MKM Partners, said that this event is non-fundamental for the company. However, the stock split and potential increase in trading by retail investors could provide a catalyst to turn around sentiments.
The stock has gained 14% in the last two weeks but remains down by more than 10% since the split was first announced on March 9. This year Amazon shares are down by 25% compared to Nasdaq 100 index’s 22% decline.
Other notable stocks that rose on Monday included Apple Inc, which rose 1.9%, Microsoft Corp. by 12.3%, Meta platforms Inc. 1.8%, and Alphabet Inc. by 2.4%.
The weakness in the market this year was due to investors dumping tech and other growth stocks against the backdrop of the economy affected by slow growth, rising interest rates, and high inflation. Analysts have also pared backed their estimates for online revenue growth.
Despite the recent stock market weaknesses, Analysts on Wall Street remain universally optimistic about the prospects of Amazon stock, with about 95% of them tracked by Bloomberg, recommending buying based on the long-term growth prospects of cloud computing and online retail.
Only two analysts advocated selling the stock, compared with 56 buying and one analyst recommending holding the stock. Analysts’ average price target is an upside of more than 40% from current levels for the Amazon stock.
Amazon.com Inc. is not the only major company to declare a stock split this year. In early February, Google’s Parent company Alphabet announced a 20 to 1 split of its stock. The split will come into effect next month.
Tesla Inc. said in March that it would ask its investors to approve additional share creations so that it can implement a split following the 5 to 1 split exchange done in 2020. Shopify announced a 10 for one stock split in April.
