Firstly, a stock split would open up the stock to a much wider and diverse group of investors. AMZN’s current share price around $759 is far too expensive-looking for small-time investors, who generally prefer to purchase stocks whose prices are well below $100.
Next, it would set Amazon up for inclusion in the Dow Jones Industrial Average. As a price-weighted index, the Dow simply can’t accept a stock whose price is so high. Like Apple did a few years ago, Amazon would need to execute a large stock split — possibly as high as 10-to-1 — in order to be included in the Dow. And even then the Dow might have to rejigger its formula to accommodate Amazon (which it had to do for Apple as well).
Inclusion in the Dow is a prestigious achievement. Only 30 companies can boast being a part of it, and it would put Amazon on the radar of many investors who normally wouldn’t have considered it for their portfolios.
Finally, from a historical standpoint, stock splits seem to boost share prices, at least in the short term. This is a matter of perception more than anything: investors assume that a company must be doing really well for it to execute a split, hence interest in the name spikes, and more people pile in.
It’s been almost 17 years since Amazon’s last stock split, and the time is right for another one.
Amazon shares were mostly flat in premarket trading Friday at $759.52. AMZN has gained 12.3% year-to-date, easily beating the benchmark S&P 500’s 7% rise in the same period.