Could e-commerce and cloud-computing giant Amazon (NASDAQ:AMZN) announce a stock split in the near future? It's quite possible. After all, shares are trading at a lofty $3,000 each.<\/p>\n
Assuming shares are trading at this level at the time of a 6-for-1 split, it would put shares at a nice, even $500. Even better for shareholders unwilling to shell out $500 for a single stock, a 15-for-1 split could get shares down to about $200.<\/p>\n
Stock splits have been all the rage lately in the financial media. Both Appleand Teslarecently split their stocks, making them more accessible to a wider base of investors. Apple split its stock on a 4-for-1 basis last month and Tesla split its stock on a 5-for-1 basis on the same day.<\/p>\n
Perhaps Amazon will be one of the next megacap stocks to jump on the recent stock-split bandwagon.<\/p>\n
Image source: Amazon.com.<\/p>\n
A stock split wouldn't be a new idea for Amazon's board. Since the company's initial public offering in 1997, Amazon has split its stock three times:<\/p>\n
With shares up 3,800% since the company's last stock split, it wouldn't be surprising to see Amazon execute another stock split soon. At $3,000 a share, the stock isn't very accessible to many retail investors -- particularly those whose brokers don't let customers buy fractional shares.<\/p>\n
Investors should keep in mind that stock splits do nothing to make stocks better investments. A stock split is simply a form of financial engineering in which shares are split up while the value of a shareholder's total stake in the company remains the same. For instance, an Amazon shareholder's stake in the e-commerce and cloud-computing company would be the same before and after a 15-for-1 stock split.<\/p>\n
Image source: Getty Images.<\/p>\n
The best way to visualize the mechanics of a stock split is to picture a pizza before and after it's sliced. Both before and after it's cut, the pizza is the same size and offers the same amount of underlying calories to be consumed. Similarly, a shareholder's ownership in Amazon will be the same both before and after a stock split. After a 15-for-1 stock split, the total value of the 15 shares will simply equal what one share was worth before the split.<\/p>\n
Potential stock split aside, Amazon remains an intriguing investment. While investors have to pay a premium valuation (a factor that's notably unaffected by stock splits) to get in on this growth story, the company's business is booming. Second-quarter revenue surged 40% year over year to $88.9 billion, and operating income soared from $3.1 billion in the year-ago quarter to $5.8 billion. Positioned to benefit from the rapidly growing e-commerce and cloud-computing markets, Amazon's business will likely continue growing by strong double-digit rates for years to come.<\/p>\n
With shares trading at an extremely high price of $3,000, and given the company's underlying momentum, it seems like a great time for Amazon to split its stock. Of course, there's no guarantee it will.<\/p>\n
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Will Amazon Split Its Stock? - The Motley Fool<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Could e-commerce and cloud-computing giant Amazon (NASDAQ:AMZN) announce a stock split in the near future? Continue reading