Amazon
AMZN
declared a 20-for-1 common stock split for the first time in over two decades. The company has authorized a share buyback of $10 billion. The split might aid the e-commerce giant in earning a spot in the Dow Jones Industrial Average.
The meeting to procure stockholder approval for the stock split will be held in May 2022. If approved, each Amazon shareholder will receive 19 additional shares for every share held from early June 2022. The approval would lessen the stock cost from about $3,000 a share to about $150 a share.
The motive behind the stock split is to make the company’s stock more affordable to employees and retail investors, thus boosting demand for Amazon’s shares. This, in turn, should push share prices up again.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. price-consensus-chart
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Amazon.com, Inc. Quote
The company has followed in the footsteps of
Alphabet
GOOGL
, which had announced a similar stock split of 20-for-1 in February this year to reduce its share price from about $2,700 per share to about $150 per share.
Through this split, Alphabet intends to enter into the Dow Jones Industrial Average, a 30-company index of stocks that tends to exclude high-priced securities. This membership will enable Alphabet to attract more retail investors.
Last year, in July 2021, the graphic processing unit (“GPU”) inventor,
NVIDIA Corporation
NVDA
, had split the common stock in four-for-one, making it affordable for small investors.
The split had increased the number of authorized shares of NVIDIA to 4 billion.
It is worth mentioning that this marks the third time Amazon is splitting its shares, the last time being in 1999. Notably, the company’s shares have returned 226% in the past five years, significantly outperforming the Zacks
Internet – Commerce
industry’s five-year growth of 11.2%.
A solid balance sheet and robust cash flow generating capabilities help Amazon in boosting shareholders’ wealth. As of Dec 31, 2021, the company’s net cash amounted to $47.3 billion, up from $28.9 billion as of Sep 30, 2021. The company’s debt-to-total capital ratio was 0.26 as of Dec 31, 2021, down from 0.29% as of Sep 30, 2021. Increased net cash balance along with decreasing debt-to-capital ratio and no short-term debt obligations remain positives.
Additionally, Amazon boasts a sturdy cash-flow generating ability bolstering the company’s liquidity position. It generated $22.1 billion of cash from operations in the fourth quarter, up from $7.3 billion in the third quarter. In the full year of 2021, the company generated $46.3 billion of cash from operational activities.
Zacks Ranks & A Key Pick
Amazon and Alphabet both currently carry a Zacks Rank #3 (Hold), while NVIDIA sports a Zacks Rank #1 (Strong Buy). Shares of AMZN declined 8.9%, while the same for GOOGL and NVDA rallied 31.1% and 84.6%, respectively, in the past year.
A better-ranked stock from the broader computer and technology sector is
Advanced Micro Devices
AMD
sporting a Zacks Rank #1. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
The Zacks Consensus Estimate for AMD’s first-quarter fiscal 2022 earnings has been revised upward by 23 cents to 91 cents per share over the past 60 days. For fiscal 2022, earnings estimates have moved south by a penny to $3.99 per share in the past 30 days.
AMD’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 17%. Shares of AMD have gained 34.4% in the past year.
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