Amazon's stock (AMZN) is about to get much cheaper on paper, and investors are loving the newfound opportunity.
Shares of the e-commerce giant soared 7% in pre-market trading on Thursday on the heels of a 20-for-1 stock split announcement. The company also uncorked a massive $10 billion stock buyback plan.
Amazon's stock split is the fourth one in its history. The last split came in September 1999.
If shareholders approve of the split, it will begin trading on the new basis on June 6.
"Big tech stalwarts all saw massive strength during the pandemic and the stocks are now ripe for a split. Amazon is following the lead of Apple, Tesla, and Alphabet on the stock split path. These are smart moves as investors positively digest stock splits. We believe tech names are oversold as we seen in five years," Wedbush tech analyst Dan Ives told Yahoo Finance.
Apple split its stock 4-for-1 in 2020s. Tesla's 5-for-1 stock split also occurred in 2020. Alphabet's 20-for-1 stock split was announced in February.
While Amazon's stock split technically doesn't change the fundamentals of the company (as this Yahoo U explains), it could entice investors back into a stock that had been treading water amid slowing growth as the company picks up spending on various initiatives.
Amazon shares are down about 9% in the past year, compared to a 7% gain for the S&P 500. The stock is the second worst performer in the FAANG [Meta (formerly Facebook), Amazon, Apple, Netflix, Google] complex in the last 12 months, with Netflix leading the way lower at a 32% drop.
The stock's relative underperformance hasn't shaken the confidence of Wall Street, however.
“We continue to rate Amazon as our top FANG and large-cap internet stock for 2022,” Bank of America tech analyst Justin Post said in a recent note. “Amazon's profit outlook is improving as the COVID impact on labor and supply chain subsides.”
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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