Will AMZN Stock Split in 2018?
Amazon.com, Inc. (NASDAQ:AMZN) has one of the highest stock prices in the entire tech industry. Coming in at well over $900.00 per share, the price can often be daunting for smaller investors. This leaves many asking if there will be an AMZN stock split in 2018. And, if it’s going to split, what is the Amazon stock split date 2018?
First, let’s go over why a company would want to split its stock in the first place. When a stock price gets so high that smaller investors can no longer afford to own one (or at least, are scared to pay so high a price for a single share), companies usually tend to look towards stock splitting as a solution to that problem.
In the case of an AMZN stock split in 2018, the prohibitive nature of a near-$1,000 stock keeps many retail investors away from Amazon stock.
Couple this with the fact that—being the price that it is—an investor playing around with, say, $10,000 would only be able to own, at most, 10 AMZN shares. While this isn’t necessarily a problem on paper (after all, whether you own 100 shares at $10.00 or 10 stocks at $100.00, a 10% gain will still net you the same results in both cases), there is definitely a psychological barrier to investing so much in so few shares.
Which makes an Amazon stock split date 2018 all the more sensible for Amazon.
But then, you have to consider that the company has never been one to lean toward stock splits (more on that later).
Let’s first examine why Amazon would want to split its stock in the first place.
Why Amazon Will Split Its Stock?
Amazon is a powerhouse company that has seen its business grow in all directions. Between the bread-and-butter online marketplace that it created, which has pretty much dominated consumer e-commerce for decades now, its deployment of the “Amazon Web Services” (AWS), and its innovative moves toward the future with products like “Alexa,” you have what is one of the most well-regarded and desirable stock tickers in the world. You need not look much further than the Amazon stock chart to see the company’s success over the years.
So you have a very desirable ticker with a lot of interest from investors already; what would an AMZN stock split in 2018 accomplish?
As mentioned above, it would open up Amazon stock to a number of smaller investors who would be much more willing to buy Amazon shares at a quarter or even half their current value. The stock split will likely see a gain in share prices, as the immediate aftermath would see an influx of capital that had previously been held back.
But another interesting angle for an Amazon stock split date 2018 has to do with the Dow Jones Industrial Average (DJIA).
The renowned index only tracks 30 companies that it admits into its club, and Amazon has long since qualified as potential member of the DJIA. With other tech giants like Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) already a part of the DJIA, it would make sense for Amazon stock to join their ranks.
So what does this have to do with stock splitting?
The DJIA tracks share prices, while other indexes, like the NASDAQ, are tied to market capitalization. This important distinction means that any company in the DJIA with a high enough share price will have an outsized influence on the index as a whole. Which is why the DJIA only admits large companies with relatively smaller share prices into its fold.
Only a single stock among the 30 eclipses the $200.00-a-share mark, meaning that Amazon’s current price of $944.00 per share is well over the limit that the DJIA would be willing to accept.
After all, if Amazon joined the index as is, it would have far too high an influence on the overall price of the DJIA.
Apple famously orchestrated a 7-for-1 stock split prior to joining the DJIA, so it’s not unheard of for companies to make moves in order to become part of the DJIA.
While joining the Dow would certainly be an incentive for Amazon, is becoming part of the index all it’s cracked up to be?
As illustrated by the data below, companies tend to excel when they’re booted from the 30-member list, while the new joiners often have rougher starts.
|Stock Added (Ticker)||1-Year Move after Change (%)||Stock Removed (Ticker)||1-Year Move (%) after Change|
|Apple Inc. (AAPL)||-16.9||AT&T Inc. (T)||+17.2|
|Goldman Sachs Group Inc (GS)||+9.2||Bank of America Corp (BAC)||+17.9|
|Visa Inc. (V)||+7.6||HP Inc (HPQ)||+72.0|
|Nike Inc (NKE)||+16.3||Alcoa Corp (AA)||+91.0|
(Source: “This could stop Amazon’s stock rally in its tracks,” MarketWatch, May 15, 2017.)
Another potential obstacle comes from just which stock the DJIA would remove in order to insert AMZN stock.
If the DJIA wanted to go with the weakest performer, that would not be such a hard choice. But if it instead preferred to knock out another tech company, that could take a little more thought. For instance, the smaller International Business Machines Corp. (NYSE:IBM) could be booted but, again, it would make for a tougher decision.
Overall, there would certainly be benefits to an AMZN stock split in 2018, but the question is whether Amazon is interested.
And it’s also worth noting that the Amazon stock split history shows that the company has been pretty gun-shy when it comes to pulling the trigger.
|Amazon Stock Split History (year)||Split Ratio|
Amazon stock has split only three times in its history, all of them in 1998 and 1999, right before the dotcom bust that tanked many businesses in the tech sector.
Since then, the company has held steady to its current price, choosing to forgo stock splitting.
If that pattern holds, it might be awhile yet before we see an Amazon stock split. On the other hand, having such an extended run without cutting the price could signify a lead-up to a big split.
How a Stock Split Will Affect AMZN Stock Price
As mentioned above, we could see a spike in investors as the stock price lowers. On the other hand, an AMZN stock split in 2018 could replicate the 7-for-1 AAPL stock split in 2014, which had a very small effect on the stock’s overall price.
As mentioned above, there are many ways that the split could affect the Amazon stock chart, but it will most likely have a small positive effect in the immediate aftermath, with longer-term consequences potentially arising from the motivation behind the split. For instance, if Amazon splits in order to join the Dow, that will have far-reaching consequences for the stock.
If the DJIA’s history holds, for instance, Amazon as a newcomer may actually see its growth slowed by entering the DJIA.
In any case, there are a lot of factors to be aware of should Amazon initiate a stock split.
The Future of AMZN Stock
While it’s important to keep an eye out on the potential AMZN stock split in 2018, and—more importantly—the Amazon stock split date 2018, the company itself has been off to a great 2018 so far.
It’s important to remember that, stock split or no, Amazon is consistently one of the best-performing stocks on the market, raking in strong returns for years now.
Chart courtesy of StockCharts.com
The company’s stock price is up over 25% since the beginning of 2017, 33% in the past 12 months, and 314% over five years.
And those numbers don’t seem to be slowing down.
The Amazon stock prediction is looking positive, as its home helper the “Amazon Echo” and the Alexa devices are gunning to be the top home helper products on the market, while the continued dominance of AWS helps the company expand in the Internet services sector.
All this while the company looks into growing its movie production side, and even attempts to challenge Netflix, Inc. (NASDAQ:NFLX) in the streaming market, with its “Amazon Prime Video” offering.
There’s a lot to be excited about in terms of what Amazon has coming down the pipe. Its technological development is top-notch, and its e-commerce platform is still second to none.
While a stock split would be a great time for smaller investors, don’t be too dissuaded by the high stock price. Remember, it’s not the number of stocks you won, it’s the quality of stocks.
Sure, on a gut level it makes more sense to want to be able to buy more with less. That’s usually how commerce works, after all. But, in the world of the stock market, getting one stock can be more valuable than getting 1,000 stocks, as it very much depends on the company and the price of the shares.
In AMZN stock’s case, you could wait for a possible stock split, but then you’d be missing out on projected gains for the next coming quarter. Or you could jump in and get just a few stocks, but know that your low number of shares doesn’t mean they won’t be great earners for your portfolio.