Amazon AMZN, the widely acclaimed mega-cap tech giant, shocked the market by announcing a 20-for-1 stock split in early March. Amazon shares have been in cruise mode for the past few years, hitting $3,750 at all-time highs and significantly raising the barrier of entry for potential investors.
Stock splits have grown in popularity recently, with other giants such as Alphabet, Inc. GOOGL and Tesla TSLA getting in on the action to reduce high stock prices. Now, after Amazon’s first spin-off since 1999, investors will have the opportunity to buy stock at a more attractive and affordable price.
A stock split does not affect the valuation of a company, but it reduces the value of each individual stock, making it easier to multiply the stock price and generate significant gains. The tech giant’s split is set to take place on June 6, but there are three reasons why I think you shouldn’t wait and buy Amazon stock now, before the split.
Robust Cloud Services
Amazon Web Services (AWS) is the world’s most comprehensive and widely adopted cloud platform. The service has millions of customers, including fast-growing startups, large enterprises, and prominent government agencies. These customers rely on AWS to reduce business costs, become more agile in the cloud, and accelerate innovation.
With more than 200 comprehensive data center services worldwide, AWS provides customers with an effortless experience that’s faster and more cost-effective than any other cloud provider. Additionally, AWS has the deepest functionality within its services, offering the widest variety of databases purpose-built for a wide range of applications.
It is the company’s fastest growing source of revenue. From 2020 to 2021, AWS net sales jumped nearly 80%, raking in $62 billion from the previous figure of $35 billion. This line of business appears to remain rock solid, with companies such as Meta Platforms FB and Best Buy BBY having recently selected AWS as their preferred cloud provider. Additionally, Nasdaq shared its multi-year partnership to migrate its markets to AWS to become the world’s first fully enabled cloud-based exchange.
Amazon absolutely dominates the e-commerce and entertainment space. With lucrative features and the benefits of its flagship Prime service bringing consistent web traffic, the company has become the benchmark for online shopping and entertainment. Notably, Amazon announced a price hike for Prime subscriptions in its most recent quarter.
In 2021, AMZN held its biggest holiday shopping weekend from Black Friday to Cyber Monday. US-based third-party sellers sold an average of 11,500 products per minute, and more than 130,000 third-party sellers exceeded $100,000 in sales during this time.
To expand on my point, the company had record online sales in 2021 and raked in $222 billion, up nearly 13% year-over-year from 2020. As the digital world continues its rapid expansion, online shopping demand rises to remain strong, and Amazon will be one of the biggest beneficiaries.
It adds high-quality digital entertainment to its Prime Video service, and since 2018 the service has tripled the number of Amazon Originals. Starting September of this year, Prime Video will be the exclusive home of Thursday Night Football as part of a landmark 11-year deal with the NFL.
Amazon’s Alexa is the company’s best-known device that has taken the world by storm in recent years. However, AMZN’s catalog of devices extends far beyond that, and the company recently announced several innovative new devices in its latest earnings report.
The company has introduced a new in-car experience allowing passengers to use Alexa or on-screen touch controls to access over a million TV episodes on Fire TV, a device that has been purchased over 150 million times around the world since 2014.
It has launched its Amazon Smart Air Quality Monitor in several countries, a device that allows consumers to monitor the presence of allergens and toxins indoors, making it easier for customers to check the air quality at home. inside their home.
Additionally, shipping has begun for the Ring Alarm Glass Break Sensor, a device that uses artificial intelligence technology to monitor glass windows or doors, alerting customers whenever glass is broken.
The Tesla Split
Moving away from Amazon, Tesla TSLA was a very famous example of a lucrative stock split. TSLA designs, develops, manufactures and sells electric vehicles and stationary energy storage products.
The company recently made headlines at its annual shareholder meeting where it intended to seek approval for another spin-off; the previous one was in 2020. Since then, Tesla shares have jumped nearly 130%, benefiting from increased trading volume and increased interest in cheaper stocks.
Tesla’s FY21 sales fell just under $54 billion, a 70% increase from 2020, and since 2017 TSLA’s revenue has grown nearly 360% , or $42 billion. In the past 60 days, Tesla’s earnings estimate for the current year has risen almost 5% to $9.73 per share, and next year’s EPS estimate has risen 2.5% up to $12.99 per share. The company has an average surprise EPS of 33% across its last four earnings reports, and in its most recent quarter, TSLA beat estimates by 20%.
Tesla is a Zacks Rank #1 (Strong Buy) and has an overall VGM score of a D. The chart below dates back to August 31, 2020 – The day TSLA shares began trading on a split-adjusted basis of shares.
Tesla, Inc. Price, Consensus and EPS Surprise
Tesla, Inc. price-consensus-eps-surprise-chart | Quote from Tesla, Inc.
Before we wrap up, let’s look at some key steps to building trust in AMZN.
Analysts have raised their earnings estimates over the past 60 days, increasing the consensus estimate trend for the current year by 7.5% to $52.22 per share and for next year. 4% up to $76.02 per share.
AMZN smashed estimates by 620% in its most recent quarter and has a surprising four-quarter average EPS of nearly 170%. One metric that has stuck with me, book value per share, has also risen significantly since 2016. Additionally, AMZN’s future earnings multiple of 62.6X is well below its 2022 high of 83.6X. The chart below illustrates the growth in book value per share.
Image source: Zacks Investment Research
A robust cloud platform, a well-established Prime service, and a commitment to diversifying the company’s product portfolio are the reasons I think Amazon stock should be bought ahead of the split. Also, with a much lower price, the trading volume will increase and help drive the stock price higher. Amazon is currently a Zacks Rank #3 (Hold) with an overall VGM score of an A.
Amazon.com, Inc. Pricing, Consensus, and Surprise EPS
Amazon.com, Inc. price-consensus-eps-surprise-chart | Quote Amazon.com, Inc.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know our top 10 buy and hold tickers for all of 2022?
Last year 2021 Zacks Top 10 Stocks the portfolio generated gains as high as +147.7%. Now, a brand new portfolio has been selected from over 4,000 companies covered by the Zacks ranking. Don’t miss your chance to participate in this long term shopping
Access the Top 10 Zacks Stocks for 2022 today >>
Click to get this free report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Best Buy Co., Inc. (BBY): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Meta Platforms, Inc. (FB): Free Stock Analysis Report
Alphabet Inc. (GOOGL): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.