Amazon Stock Soars to New Heights After Five-Year Slump
For the first time in about five years, Amazon’s stock (AMZN) AMZN, 1.63% is trading in three-digit territory, because the ecommerce and cloud giant’s 20-for-1 stock split has taken effect. Amazon Stock The stock closed Friday at a pre-split adjusted $2,447, and was trading up 0.7% in premarket trading Monday morning, even though it wasn’t the first stock to cross the threshold on Sunday evening—in fact, it was Ulta Beauty Inc.
A Quick Recap
Amazon stock has been trading below $1,000 since 2014. A three-digit share price is an inflection point for any stock, and investors will want to keep a close eye on AMZN’s price over time to see how high it climbs from here. If Amazon stock continues to rise and climbs past $2,000 per share in 2022, it will be an incredible boon for early investors—but if that milestone is reached only briefly before falling back again, then there will be much less cause for celebration. To help you evaluate Amazon’s long-term prospects and determine if it’s a good investment opportunity today, here are some key takeaways from our analysis. How To Buy Amazon Stock What makes Amazon such a compelling buy now?
Understanding Split Economics
With Amazon stock split having now taken effect, shareholders are celebrating a little more today than they were yesterday. Amazon is trading at its highest levels since early 2014—hovering just above $2,500 per share. This is particularly noteworthy because it hasn’t been trading in three-digit territory since late 2014; prior to Friday, shares hadn’t traded above $200 per share since late 2013. If you were an investor who bought into Amazon at its previous highs of about $270 back in 2013 and then held on through splits, you’re not feeling too bad about yourself right now.
Should I Buy Amazon Stock? Many investors are faced with a tough question: Should I buy Amazon stock? With the company trading around $1650, you might wonder if it’s time to invest in Jeff Bezos’ growing empire. The company is so big that it’s hard to see where it might go in 2018 and beyond—and whether it will survive.
In other words, should you buy AMZN stock? It all depends on what you think of Amazon as a business. If you’re looking for investment advice or an invitation to value your current portfolio, take a look at our tips here on how professionals create portfolios and value them at websites like Paying Myself First.
Increased Demand for Shares
Amazon stock Amazon, 1.63% is up nearly 30% in 2019 and has risen more than 2,400% since 2013 The company is expecte to double its operating profit by 2020.
Even with a stock split, Amazon market capitalization of more than $850 billion remains well ahead of Apple Inc.’s AAPL, 1.15% market cap of about $742 billion and Alphabet Inc.’s GOOGL, -0.02% roughly $700 billion in market cap. Amazon shares have had their price cut in half four times before: In 1997, 2005, 2011 and 2016. And each time it happened on June 23rd or 24th during regular trading hours…
What Does It Mean for Investors?
When you buy shares of stock in a company, you’re purchasing partial ownership in that company. In some cases, like with Amazon, your shares will be split after a certain amount of time, which means that each share is worth less because there are more of them. The value of your individual holdings decreases.
On April 3rd, Amazon stock split five years and one day after it last did so (the prior split happened on April 2nd 2013). On both occasions, investors who held onto their shares have benefited in ensuing years. For instance, if you’d bought $100 worth of Amazon stock back then and hung onto it until today (April 2nd 2022), those same shares would be worth more than $3200 as of Friday’s close.
Why Did Amazon Do It?
The move has been in question for quite some time, but it’s now a reality. What Amazon said publicly was that it wanted its stock price to be more accessible. But while that sounds great on paper, there are other reasons why Amazon did it: If a company increases its share count through splitting or issuing new shares,
then earnings per share (EPS) will decrease as a result. However, EPS is one of two main components use in calculating price-to-earnings (P/E) ratios. Therefore, increasing a stock’s total shares outstanding can boost its P/E ratio. In turn, companies can attract more investors and drive up their stock prices. This is because stocks with higher P/Es look more attractive than stocks with lower P/Es.