Amazon stock with the split-adjusted price started trading on Monday and closed the session 1.99 per cent higher at $124.79. The post-split share price of Amazon at $122 reflected the pre-split price of $2447 as 20-1 was the stock split ratio. On Tuesday, the Amazon share price fell by 1.43 per cent to end the day at $123.
For several investors, to see Amazon quoting in 3-digits was something that took time to digest. What had happened was that shares of Amazon were trading around $124 as the stock split had taken effect.
Stock-splits bring in a new set of investors to the arena. Being highly prized, stocks like Amazon may remain out of reach of many investors. But, after the stock is split, the price falls thus making investors buy more with the same amount of money. However, fundamentally, nothing much changes about the company after stock-split.
New investors start buying and even existing investors add more to their portfolio after stock splits. “Historically stock splits have led to price increases. Even though one could have bought fractional shares when the price was around $2400, at around new $120 price, Amazon shares have become more affordable post the split,” says Viram Shah, Co-founder & CEO, Vested Finance
When it comes to owning Amazon stock after the stock-split news, keep your decision based on the company’s future growth potential and fundamentals. “If you’re buying into the stock or holding the stock it should not be because the price may see an increase in the next week or so. It should be because you believe in the company and its fundamentals,” says Shah.
If you are looking to diversify across US stocks, holding Amazon could be one stock that you may consider for the long term. The stock is already down by over 20 per cent in the last 1-year. “Reasons to believe that the Amazon stock has potential would be its thriving cloud computing business, the fact that it is developing a robust advertising business, and also that the stock is now down substantially from its highs and now trading at a reasonable valuation,” adds Shah.