As Amazon (NASDAQ:AMZN) -2.60% approaches its next stock split, there is one question on everyone’s mind: will the split launch a new wave of gains?
Amazon stock has impressed investors over time – rising over 1,500% in the last ten years. But in recent times, performance has been mediocre. For example, Amazon ended the previous year with little changed.
Amazon is not new to stock splits. The retail giant has held three of them in the past. They were all in a brief period almost two decades ago.
The next stock split is scheduled for early June. For some clues as to what might happen, analysts considered the last three developments below. Each of them tracks stock performance in the six months following stock splits.
1. First stock split
Amazon’s first stock split took place on June 2, 1998. Amazon stock rose in the three months following the break, then returned some of the gains before advancing further. Over the entire six-month period, the stock has jumped more than 300%.
2. Second stock split
The company’s second stock split took place on January 5, 1999. The stock immediately rose – then sank. A few months later, he gained some momentum but ended the six months with little changed.
3. Third Share Split
Finally, Amazon’s third stock split was on September 2, 1999. Following the first stock split pattern, the stock rose in the first three months after the trade. Then it fell – and didn’t recover much. At the end of the semester, the stock had only increased by about 4%.
What Does This Mean For Investors?
Should investors be worried after seeing mediocre performance after two of the three previous divisions? Not if you’re a long-term investor, according to analysts.
The only performance linked to the actual split is in the concise term. That is due to new investors entering the stocks or current investors adjusting their positions in the days following the break.
Beyond that point, any gains or losses are not due to the stock split itself. Instead, they’re likely tied to company news — or what’s happening in the economy and how it might affect the company.
It’s also worth noting that Amazon was a very different company in the late 1990s and early 2000s. Two critical parts of Amazon didn’t yet exist. Of course, I’m talking about the Prime subscription service and Amazon Web Services. They were released in 2007 and 2006, respectively.
It’s good to look at the above data and understand how Amazon performed after its previous stock splits. After all, it’s part of the company’s overall history. And more importantly, it shows us that stock splits do not drive a stock’s performance over time.
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