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Amazon Stock Sharing: The price is set to fall, but it will not make it cheaper

That is about to change.

Amazon (AMZN) does what is known as a share split, which increases the number of outstanding shares that a company has and also lowers the share price, making it more affordable for the average investor.

The split, which takes effect Monday, will be a 20-for-1 transaction, meaning that if you owned one share in Amazon, you would end up with 20 shares after the split, each costing about 1/20 of the previous one. the price. So the value of your investment does not change, and one Amazon share that was traded for just under $ 2450 would become 20 shares, each costing a little more than $ 1[ads1]20.

Why is Amazon doing this now? Companies with sky-high stock prices often announce splits to make stocks seem cheaper to retail investors. Google and YouTube Owner Alphabet (GOOGL)which trades at a price of more than $ 2300 and has a market value of almost $ 1.5 trillion, has also approved a 20-1 split that will take place in July.
Online store Shopify (SHOP) has a share split of 10 for 1 planned later in June, while Tesla (TSLA) and meme makes dear GameStop (GME) have proposed splitting their shares as well.
Chewy can get out of Wall Street's dog house

But here’s the thing: Even if a share split can do it seems as a stock is now cheaper, it does not actually make the stock cheaper when looking at valuation targets such as price-to-earnings or price-to-sell ratios.

Amazon will still be worth around $ 1.3 trillion after the split takes place. The share will continue to be traded for more than 150 times the earnings forecasts for this year and almost 2.5 times the estimated 2022 sales – conditions that are significantly higher than the broader stock market, as well as other retail leaders such as. Walmart (WMT) and Goal (TGT).
Many individual investors who have wanted to own growth stocks such as Amazon, Google and Tesla were often forced to buy fractions (ie parts of one stock) or gain exposure to these companies through popular listed index funds such as the SPDR S&P 500 ETF or the Invesco QQQ ETF. which tracks the Nasdaq 100.

Therefore, it is a “smart move” to make the stock prices of four-digit stocks more accessible, according to Michael Mullaney, director of global market research for Boston Partners. This should allow more investors to buy so-called round tickets (100 shares) from a company instead of just a handful of shares.

The memory comes back.  GameStop and AMC hover

“Retail investor trading has increased dramatically over the past year and a half and has become very important again. It’s not just large institutions and hedge funds,” Mullaney said. “But it is impossible for an average investor to buy 100 shares of any of these shares at these prices.”

Professional investors have also noticed this. Amazon shares have risen almost 6% in the last week, as some traders may be looking to buy before the split takes effect. (Amazon is still down more than 25% this year.)
Shares of shares for Amazon and Alphabet can also serve another purpose: it can increase the chances that both companies will eventually be added to the Dow.

The prestigious group of 30 leading US companies is a price-weighted rather than a market-value-weighted index. So at their current stock prices, Amazon and Alphabet could not be added to the Dow without having an oversized impact on the daily movements of the index.

UnitedHealth (UNH)which trades at just under $ 500 per share currently has the largest weighting in the Dow, followed by Goldman Sachs (GS) and Home Depot (HD)which each trades for more than $ 300.
The high share price was one of the main reasons for this apple (AAPL) was not added to the Dow until 2015, several months after a share split pushed the price from the high triple digits to below $ 100 per share.

So the looming splits for Amazon and Alphabet could pave the way for these tech titans to join Apple and Microsoft, the only two companies in the US with higher market value than Amazon and Alphabet, in the Dow.

Is inflation finally at its peak?

Large technology stocks are not the only things with high prices. Consumers and businesses have struggled with rising prices for goods and services over the past year. Investors will get a new look at how high prices have risen when the US government publishes its latest consumer price index (CPI) on Friday.

Inflation concerns are real, but this is not the 1970s
Prices rose 8.3% in the last 12 months ending in April. However, this increase, although still stubbornly high, was the first fall in consumer inflation from year to year since August. Consumer prices rose 8.5% during the 12 months ended March. So economists hope the level of price increases will continue to decline over the next few months.

Still, it may take some time for consumer prices to reach a level that is more comfortable for customers … and the Fed. The Fed ideally wants to see the CPI reduced to about 3% to 3.5%, if not lower, before declaring one victory against inflation.

“The good news is that inflation rates are starting to fall,” said Ken Shinoda, a portfolio manager at DoubleLine. “The question is will they come down enough?”


Monday: Amazon action split. Apple’s worldwide developer conference begins.

Tuesday: Income from United Natural Foods (UNFI), Smucker (SJM) and Caseys general (CASY)
Wednesday: Income from Campbell soup (CPB), Brown-Forman (BFB), Ollie’s Bargain Outlet (OLLI) and Five under (FIVE)
Thursday: European Central Bank meeting on interest rates; Weekly Unemployment Claims in the United States; earnings from Nio (NIO), Signet Jewelers (SIG), Vail Resorts (MTN), DocuSign (DOCU) and Stingfiks (SFIX)

Friday: Bank of Russia meeting on interest rates; US consumer price index; University of Michigan USA consumer mood

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