Following a 20-1 split, Amazon’s shares will have a fair value estimate of $192.50 per share.
Amazon.com (AMZN) is planning a 20-1 stock split, the company’s first in more than two decades and the largest in its history, in which shareholders will receive an additional 19 shares for every one they already possess.
The Amazon split will take effect at the close of trade on June 3, dividing the company’s closing price by 20 to account for the increased number of shares. On June 6, the shares will begin trading on a split-adjusted basis.
What Does Amazon’s Stock Split Mean?
Morningstar senior analyst Dan Romanoff’s valuation of the company, which he valued at $3,850 per share before the split, is unaffected by the split. Morningstar’s fair value estimate for Amazon.com will be divided by 20 as a result of the split, valuing the company at $192.50 per share.
As of June 1, the company was thought to be undervalued by 37%. Amazon is a broad moat stock, according to Morningstar, which suggests it has a long-term competitive edge.
“We expect e-commerce to continue to eat into the market share of brick-and-mortar stores in the long run,” Romanoff says. “We also expect Amazon to grow its online market share. AWS and advertising will be critical growth drivers in the medium term. We expect these segments to push margins higher over time because they earn considerably better margins than the rest of the business.”
(Future Stock Splits)
Amazon is one of several well-known tech and consumer corporations that have announced plans to split their stock. In February, Google’s parent company, Alphabet (GOOGL)/(GOOG), announced plans for a 20-1 stock split for both its Class A and C shares, which would take effect on July 15. During its annual meeting on Aug. 4, Tesla (TSLA) plans to put another split to a vote of its shareholders. If the bill passes, it will be the company’s second split in three years.