Stock splits and massive buybacks could be just the boost Amazon.com Inc. needs to get out of a period of prolonged share price weakness.
Amazon said late Wednesday that it wants to boost its outstanding shares to a 20 to 1 ratio, the e-commerce giant's first stock split in more than two decades. That news, along with a $10 billion share-buyback offer, saw the stock gain 6.7% in premarket trading on Thursday.
"This is a significant, positive sign," said Morgan Stanley analyst Brian Nowak. It's encouraging that Amazon is becoming more "shareholder friendly," he said, joining the likes of Apple Inc. and Alphabet Inc., who have used splits to make their stock more attractive to retail investors. .
Amazon shares fell earlier this week to levels not seen since mid-2020, the only laggard among trillion-dollar tech companies over the past year. The stock slipped nearly 9% in 12 months, compared to rallies between 24% and 36% for Apple Inc., Alphabet Inc. and Microsoft Corp.
Smaller investors need upwards of $2,500 to own Amazon shares and a 20-for-1 split would reduce the price to around $139, based on Wednesday's closing level. Alphabet and Amazon are the last two of the five largest US technology companies by revenue, with four-digit stock prices. Alphabet's split is scheduled for July, while Amazon's is scheduled for June.
With many retail brokerage platforms offering fractional stocks in recent years, there may be a less pronounced market impact. For Peter Garnery at Saxo Bank, stock splits "add no economic value," but they often change the mix of investors who can invest in the stock.
On the other hand, buybacks can make a difference. Morgan Stanley's Novak noted that previous repurchases of Amazon gave its shares an average 12-month 100% return, showing how well timed they are.
A move to that scale could eventually pay off for Amazon's increasingly bullish Wall Street analysts. Every analyst who covers the stock has a buy recommendation, a similar consensus among large technical peers.
Most have set their price targets, even though the stock's nearly 20% decline over the past three months widened the gap to the average analyst target to about $1,350, meaning brokers saw a 48% jump from current levels. have hope.