Amazon (AMZN) Looks to Restore Optimism to Wall Street’s FAANG Favorites


Amazon (AMZN) is a Wall Street superstar by anybody’s standards – so much so that it’s difficult to imagine the stock reeling in any circumstance. With AMZN currently some 44% adrift from its July 2021 all-time high value, it’s clear that the much loved investment option has been unable to escape the clutches of the ongoing bear market. However, following a recent 20-for-1 stock split, it’s hoped that Amazon may soon be capable of recapturing past glories. 

On June 6 2022, Amazon’s 20-for-1 stock split meant that the company’s shares that closed at $2,440 the Friday prior could be available for investors at a more manageable price of around $120. 

The move has been devised to make it easier for investors to to buy shares in the company at a more manageable rate. Rather than exchanging a four-figure sum for a single share, investors can now manage AMZN shares in their portfolio in a considerably easier manner. 

Looking at Amazon’s Wall Street performance since its 1997 Nasdaq listing, we can see plenty of talking points and many perspectives to consider for investors. 

Firstly, with a 114,244% increase in stock value since its debut, it’s clear that AMZN is a juggernaut, and fully deserving of its membership to the elite collective of FAANG companies which traditionally delivered market-leading returns for investors. 

Despite this, the zoomed-out chart also shows the sheer scale of the stock’s recent decline. AMZN’s 44% fall from grace is unprecedented in scale. Even in the depths of the 2008 Wall Street crash, the stock only fell by 30% – with a similar scale dip being experienced a decade on in Q4 2018. 

Throughout Amazon’s history, the company has excelled in overcoming significant pullbacks in value. Despite shedding 30% of its stock price in 2018, a $1,000 investment in AMZN at the bottom of its dip on December 21st 2018 would still be worth $1,495 today – even despite a major market drawback. 

Turning the Corner on a Disappointing Start to 2022

Amazon’s performance has been hampered by a wide range of factors. Not only has inflation reached record-breaking levels, but the company was caught up in the supply chain disruptions spurred by the ongoing Covid-19 pandemic. 

“Growth rates began to slow after 2020, when there was a surge in online shopping that was triggered by the pandemic,” explained Maxim Manturov, head of investment advice at Freedom Finance Europe. “Amazon and online retailers faced a number of challenges with inflation now near 40-year highs, soaring staff costs, supply chain disruptions and a prolonged pandemic.”

“The company’s quarterly results, which were released on 28 April, revealed a decline in online consumer spending. This led to a drop in the company’s revenue growth rate from 44% to 7%. Disappointing quarterly reports affected the company’s stock price, which continued its decline after the publication of the report.”

Despite the difficulty that the stock has faced, investor sentiment has recently turned positive towards AMZN in the wake of the split, with commentators pointing to the prospect of long-term growth as a deciding factor to buy up the embattled stock. 

AMZN’s Split Opens Door to Accessibility

Although Amazon’s stock split has helped to lower the price that investors need to pay to buy shares in the company, alone, the action has no impact on the value of the stock in real terms. 

However, as Liz Moyer notes in a recent article published on Barron’s, the split may help to boost the prospect of the stock finding itself listed on the Dow Jones Industrial Average. 

Such an addition could be a particularly lucrative advantage for AMZN due to the heightened prospect of the stock being bought up by passive index funds and institutional investors. So far, the split itself has only brought with it a short-term pop in the value of Amazon’s stock, but the company’s market cap of over $1 trillion and easier accessibility is likely to draw in more investors of all scales when optimism begins to return to the market.  

Although it remains unclear just how the market will look tomorrow, and looking ahead to the coming months, it’s difficult to judge just where the bottom will be for growth stock favorites like AMZN. Despite it being completely feasible that the worst may not be over in terms of price movements, the longer-term outlook for the stock makes a more compelling case for investors to buy up the stock. 

Buying into Amazon’s Bright Future

Amazon may be best known as an eCommerce giant, but the company’s future security may come from a different source altogether. The prospects for cloud computing look excellent both now and in the future. Amazon Web Services (AWS) bolstered their net sales and operating income by double-digit figures in the most recent quarter – and maintained its monopoly on the cloud market with a share spanning 32% and 33% in recent years, according to Synergy Research Group. 

It’s in this field that Amazon will be future proofed even if the cost of living squeeze continues to impact consumer spending power. AWS has continued to build data centers around the world, with esteemed clients like Boeing using the platform for bespoke services surrounding aerospace design, engineering and management systems. 

Most significantly of all, AWS is a key factor behind Amazon’s growing profit margins during the company’s boom periods. In 2021, AWS represented over 70% of the company’s operating income – a figure strong enough to support the stock and deliver greater optimism for the industry’s further development. 

Amazon’s significant market presence has positioned the company favorably at a key time in the development of Web 3.0 and the metaverse. As a stock that’s proven to bounce back emphatically from its past lows, investor optimism towards AMZN following the stock’s split may be justified in the long run. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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