Amazon surges as stock split, buyback excite investors

Shares of Amazon.com Inc jumped over 5% after the e-commerce giant`s share split and buyback moves stand to draw more investors to a stock whose recent performance has been lackluster despite skyrocketing since going public 25 years ago.

The company on Wednesday announced a 20-for-1 stock split, its first since 1999, and a $10 billion share buyback. It comes on the heels of a similar split announced by Alphabet Inc earlier this year.

"Amazon`s management is looking to instill fresh confidence," AJ Bell Investment Director Russ Mould said, adding that the buyback was the company`s first direct distributions of cash back to its shareholders since its stock market debut.

Amazon shares were up 5.4% to $2,936.99 in early trading on Thursday. The company`s stock closed at $2,785.58 on Wednesday, near a two-year low after riding a pandemic-induced rally in tech and growth shares that brought it within striking distance of a $2 trillion valuation mark.

Amazon`s stock ticker was trending on investor-focused social media site stocktwits.com and was among the most discussed on Reddit`s wallstreetbets, according to sentiment aggregator Swaggystocks.
Shares of Apple Inc and Tesla Inc rallied sharply after their stock splits in 2020.

Amazon`s stock split "just makes inexperienced investors and traders feel better," said Perri Dong, a China-based portfolio manager at Redwood Winslow LLC, who said he owns Amazon shares.
"It`s just psychological. Some people believe the shares will have more liquidity, but I argue it doesn`t matter."

Grpahic: Amazon versus mega tech stocks

Amazon shares have struggled along with other growth stocks in 2022, falling 16.5% year-to-date as of Wednesday`s close.

"To state the obvious, buybacks also suggest Amazon sees value in the stock here," BofA Global Research analysts said in a note, adding that the repurchases would amount to about 0.7% of shares outstanding.

The company went public in 1997 at an IPO price of $18, or $1.50 when adjusted for stock splits that occurred in 1998 and 1999. The latest stock split will take effect on June 6.

Amazon`s share surge on Thursday was a bright spot in an otherwise gloomy market, where shares of megacap companies such as Apple and Microsoft Corp were trading lower.