Will Amazon Finally Split Its Stock in 2022 and Follow Tech Peers?

Mohit Oberoi, CFA - Author
By

Feb. 2 2022, Published 9:09 a.m. ET

Alphabet (GOOG) has announced a 20-for-1 stock split, which has bought some of the other high-priced stocks like Amazon into the limelight. Will Amazon stock split in 2022 and follow tech peers?

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In 2021, Nvidia split its stock. Pfizer was the other major split last year, while Apple and Tesla split their shares in 2020. There were rumors that Tesla was looking for another stock split in 2021.

Alphabet stock will split in 2022.

Alphabet’s board has approved the 20-for-1 stock split, which is subject to stockholder approval. The record date for the split is July 1, 2022. Stockholders will receive 19 additional shares for every Alphabet stock that they hold. The split will be completed when the markets close on July 15. The stock will trade adjusted for the split the next day.

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Do stock splits add value?

There has been a flurry of stock splits over the last few years due to the booming stock markets, which has led to a sharp rally in many stocks. Do stock splits really add value?

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Fundamentally speaking, stock splits or bonus shares don’t make any difference. The stock price falls adjusted for the stock split. In a reverse stock split, the stock rises in proportion to the split. Usually, we see that the stock price rises on a split announcement and it crashes when the company does a reverse stock split.

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What other companies should consider a stock split?

Companies do a stock split when their stock price becomes high in absolute dollar terms. A lower stock price makes the stock attractive for retail traders who would otherwise find the stock too expensive.

After Alphabet’s split, investors wonder whether some of the other high-value stocks will announce a split. These stocks include:

  • Amazon
  • Seaboard
  • NVR
  • Booking Holdings
  • Chipotle Mexican Grill
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Many investors also want to see a split of Berkshire Hathaway Class A shares. However, that split might never happen since the company has a Class B share that's priced much lower.

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Will Amazon stock split in 2022?

After Alphabet’s split, all eyes will be on Amazon. The company will be the highest-priced FAANG stock in absolute dollar terms by a fairly large margin. For example, Amazon stock trades above $3,000. Assuming that Alphabet’s stock split goes ahead, no other FAANG stock trades above $500.

It isn't that Amazon is averse to a stock split like some of the other companies. Amazon has split its shares three times since the IPO. All of the splits took place between 1998 and 1999 during the dot-com boom. Tech stocks like Amazon were on a fire in that era and the company had to split its shares twice in 1999 amid the soaring stock price.

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In 2021, Jeff Bezos quit as the company’s CEO, and Andy Jassy, who was heading the company’s lucrative cloud business, took over as the new CEO. Amazon will release its fourth-quarter earnings on Feb. 3.

While analysts will be interested in the earnings and the guidance, watch out for any commentary on the stock split.

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