On Wednesday, March 9, Amazon (AMZN) dropped a bombshell: For the first time since September 1999, the first time this century -- the first time this millennium -- Amazon will split its stock.
And we're not talking a tiny 2-for-1 or 3-for-1 split, either. After watching its share price rise an astounding 4,000%-plus over the last couple decades, Amazon will need to split its $2,900 stock into much tinier pieces in order to get the per-share price down to a reasonable-seeming level. Accordingly, Amazon announced it will split its stock 20 for 1.
Amazon's news was big enough that it's helped add nearly eight more percentage points to the stock price since the news broke. Big as the news was, though... the stock split is not the reason Deutsche Bank just initiated coverage of the stock. No, in a note delivered on Thursday, Deutsche Bank analyst Lee Horowitz outlined several reasons to love Amazon stock, but the fact that management is chopping its stock price into lots of tiny pieces was not one of those reasons.
Instead, Horowitz said he's recommending that investors "buy" Amazon stock because:
As Horowitz observes, Wall Street analysts currently forecast only 12.5% revenue growth for Amazon's e-commerce business in 2022 -- but he thinks the company will grow retail revenues twice as fast, with help from "ongoing share gains in the massive grocery market." Amazon, notes the analyst, is "ranked as the top grocer amongst consumers," and even post-Covid, he expects that consumers will do 85% of their grocery shopping online going forward.
And yet, while e-commerce is certainly Amazon's biggest business by revenue, when it comes to earning profit, Amazon's AWS cloud computing business is far more important to the company, generating nearly 75% of operating income last year. Going forward, AWS should continue to drive profits at Amazon, with Horowitz pointing out that "digital services / commerce in 2021 was estimated at ~$4tn" globally, but AWS to date has still "only captured 4% of this opportunity."
Going forward, Horowitz predicts AWS will grow from a $62 billion business in 2021, to $83 billion in 2022, and $107 billion in 2022 -- and even after that, the company's growth pathway should be a long one, with $3 trillion, $893 billion still remaining to be won. So long as AWS can "maintain its market leadership... as it leverages its increasingly robust up stack services while also focusing on verticalized offerings," Horowitz believes there are plenty more gains to be made from Amazon.com stock. (See AMZN stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Even after a sustained period of share losses, Amazon (AMZN) stock is still pricey, with one share going for $2,936.35. That, however, is about to come an end.
On Wednesday, the tech giant announced it would enact a 20-for-1 stock split, which will go into effect on June 6, should the move be given the go ahead by shareholders in May.
If that wasn’t enough to satisfy investors, the company also said it rebought $800 million of shares under its old repurchase authorization and has given the green light for a $10 billion repurchase plan.
These are rare actions for Amazon. The last stock split took place in 1999, while prior to the $1.3 billion purchase made in January, it had been 10 years – 1Q2012, in fact - since the company forked out on common stock.
If past purchases are anything to go by, then investors could be in for a good time over the next couple of years. “Historically AMZN's repurchases have been positive signals about the equity value,” says Morgan Stanley’s Brian Nowak, “as they would have earned an average return of 42% over a 6 month return period.” Likewise, assuming an investor bought and held the stock, over a 12-and 24-month period, Amazon's share repurchases would have generated returns of 100% and 135%, respectively.
While the moves are “more symbolic than material,” all these actions indicate to Nowak that the company is becoming “increasingly shareholder friendly,” and this in turn can help “catalyze potential multiple expansion.” Evidently, investors liked the announcement, sending shares ~5% higher in Thursday's trading session.
Amazon joins other tech luminaires with its latest shareholder pleasing moves, a development Nowak applauds. “As bigtech (GOOGL/FB/AAPL/MSFT) becomes more shareholder friendly (buybacks, disclosure, etc) we are happy to see AMZN participate, allowing it to better compete for investor capital,” the analyst summed up.
Accordingly, Nowak reiterated an Overweight (i.e., Buy) rating on Amazon shares along with a $4,200 price target. The implication for investors? Upside of 43%. (To watch Nowak’s track record, click here)
There are no Wall Street analysts betting against Amazon’s continued success; all 34 reviews on record are positive, making the consensus rating a Strong Buy. The average price target of $4,218 and change is practically the same as Nowak’s. (See Amazon stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.