Amazon (AMZN) is a Wall Street superstar by anyone’s standards — so much so that it’s hard to imagine the stock faltering under any circumstances. With AMZN currently around 44% off its July 2021 all-time high, it’s clear that the highly-rated investment option hasn’t been able to escape the clutches of the ongoing bear market. However, following a recent 20-to-1 stock split, there are hopes that Amazon will soon be able to return to past glories.
On June 6, 2022, Amazon’s 20-for-1 stock split meant that shares of the company that had closed at $2,440 the previous Friday could be available to investors at a more manageable price of around $120.
The move was designed to make it easier for investors to purchase shares of the company at a more manageable rate. Rather than exchanging a four-figure sum for a single stock, investors can now manage AMZN stocks in their portfolio much more easily.
Looking at Amazon’s performance on Wall Street since its Nasdaq listing in 1997, we can see many talking points and many perspectives for investors to consider.
First, with a 114,244% increase in share value since its inception, it’s clear that AMZN is a juggernaut and fully deserving of membership in the elite collective of FAANG companies that have traditionally delivered returns of forefront to investors.
Despite this, the enlarged chart also shows the extent of the stock’s recent decline. AMZN’s 44% drop is unprecedented in magnitude. Even in the depths of the Wall Street crash of 2008, the stock only fell 30% – with a similar scale drop recorded a decade later in the fourth quarter of 2018.
Throughout Amazon’s history, the company has excelled at overcoming major setbacks in value. Despite losing 30% of its stock price in 2018, a $1,000 investment in AMZN at its low on December 21, 2018 would still be worth $1,495 today, even despite a major downside of market.
Turning the corner from a disappointing start to 2022
Amazon’s performance was hampered by a wide range of factors. Not only has inflation hit record highs, but the company has been caught up in supply chain disruptions caused by the ongoing Covid-19 pandemic.
“Growth rates started to slow after 2020, when there was an increase in online shopping triggered by the pandemic,” explained Maxim Manturov, head of investment advice at Freedom Finance Europe. “Amazon and online retailers have faced a number of challenges with inflation now near 40-year highs, soaring staffing costs, supply chain disruptions and a prolonged pandemic.”
The company’s quarterly results, released on April 28, showed a decline in online consumer spending. This caused the company’s revenue growth rate to drop from 44% to 7%. Disappointing quarterly reports affected the company’s share price, which continued to decline after the report’s release.
Despite the difficulties the stock has faced, investor sentiment has recently turned positive towards AMZN following the split, with commentators pointing to the prospect of long-term growth as a deciding factor in redeeming the beleaguered stock. .
AMZN split opens door to accessibility
Although Amazon’s stock split has helped lower the price investors have to pay to buy shares in the company, that action alone has no impact on the stock’s value in real terms.
However, as Liz Moyer notes in a recent article published on Barron’s, the split could help bolster the prospect of the stock ending up listed on the Dow Jones Industrial Average.
Such an addition could be a particularly lucrative boon for AMZN due to the increased prospect of the stock being bought up by passive index funds and institutional investors. So far, the split itself has only resulted in a short-term increase in Amazon’s stock value, but the company’s market capitalization of more than $1 trillion and easier affordability should attract more investors of all scales as optimism begins to return. at the market.
While it’s unclear exactly what the market will look like tomorrow and in the months ahead, it’s hard to judge exactly where the bottom will lie for growth favorites like AMZN. While it’s entirely possible that the worst is not over in terms of price movements, the stock’s longer-term outlook provides more incentive for investors to buy the stock.
Shop in Amazon’s Bright Future
Amazon may be best known as an e-commerce giant, but the company’s future security may come from a completely different source. The prospects for cloud computing look great today and in the future. Amazon Web Services (AWS) grew net sales and operating profit by double digits in the last quarter – and maintained its monopoly in the cloud market with a market share of 32% and 33% in recent years , according to Synergy Research Group.
This is where Amazon will future-proof even as the cost of living squeeze continues to impact consumer purchasing power. AWS continued to build data centers around the world, with esteemed customers like Boeing using the platform for bespoke services around aerospace design, engineering, and management systems.
More importantly, AWS is a key driver of Amazon’s profit margin growth during business boom times. In 2021, AWS accounted for more than 70% of the company’s operating profit – a strong enough figure to support the stock and offer greater optimism for the future development of the industry.
Amazon’s significant presence in the market has positioned the company favorably at a key moment in the development of Web 3.0 and the metaverse. As a stock that has proven to rebound strongly from past lows, investor optimism towards AMZN after the stock split may be warranted in the long run.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.