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Over the last year and a half, retail investors have driven volatility in capital markets, causing spikes in several mega-cap stocks, such as Tesla, Inc. (TSLA) A stock split, wherein a company decides to formally divide its share price into smaller fractions, makes a formerly expensive stock more accessible to these traders. Additionally, a stock’s options premiums can be exorbitantly expensive, so splitting the underlying price can bring those down as well.
Amazon.com, Inc. (AMZN) has not split its stock since 1999. Due to the takeoff of tech stocks over the last decade, its price has risen to a portfolio- consuming level of just under $3,700, as of early intraday trading on Tuesday, July 27. The stock trades at about 2-3% less than its all-time high. Speculation has now begun to circulate about a potential stock split, based off several reasonable factors. (See Amazon stock charts on TipRanks)
First, Amazon is reporting earnings results this Thursday after market hours, and companies typically announce stock splits during earnings calls. If the stock split were going to happen this time of year, now is the moment when investors could expect that kind of corporate maneuver.
Secondly, the U.S. ecommerce leader has a fresh new CEO, Andy Jassy. His predecessor, Jeff Bezos, clearly was never interested in splitting the stock price. With new leadership and new visions for the company, it is possible to opine that Jassy would attempt to start off his tenure by hitting the ground running.
Thirdly, a potential entrance into the legendary Dow Jones Industrial Average would be possible only upon a splitting of Amazon’s stock price. Currently, each share is too expensive to be eligible for membership to the price-weighted Dow.
At the same time, splitting a stock is not nearly as pivotal as it once was. Brokerages like Robinhood Markets Inc. (HOOD) and Charles Schwab (SCHW) have tools for their users to purchase fractional shares. By paying only the amount they can afford, the traders on these platforms can effectively already “split” the stock themselves.
On TipRanks, AMZN has an analyst rating consensus of Strong Buy, based on 32 Buy ratings. The average Amazon price target is $4,332.90, representing a potential 12-month upside of 18.07%. These metrics are based on intraday trading prices by 10 a.m. EST Tuesday July 27.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.