Amazon experienced a significant boost in its stock price, rising more than 5%, after announcing a stock split and a share buyback. These strategic moves are expected to attract more investors to the company, despite its recent lackluster performance. While Amazon’s shares have been on a steady rise since its initial public offering 25 years ago, its recent performance has been relatively disappointing.

On Wednesday, Amazon made two important announcements. Firstly, it revealed a 20-for-1 stock split, the company’s first split since 1999. Additionally, it unveiled a $10 billion share buyback program. This news closely followed Alphabet Inc’s announcement of a similar stock split earlier this year.

Russ Mould, the Investment Director at AJ Bell, believes that Amazon’s management is utilizing these maneuvers to restore confidence among investors. Mould also pointed out that the share buyback program is the first time Amazon has directly distributed cash back to its shareholders since going public.

As a result of these announcements, Amazon’s shares surged by 5.4% to $2,936.99 in early trading on Thursday. This spike followed the stock closing at $2,785.58 on Wednesday, which was near a two-year low. Despite the company’s stock being subject to a pandemic-induced rally in tech and growth shares, nearly reaching a $2 trillion valuation, it has recently experienced a decline.

The news of the stock split caught the attention of investors on social media platforms, with Amazon’s stock ticker trending on stocktwits.com and Reddit’s wallstreetbets, according to sentiment aggregator Swaggystocks. Similar stock splits have previously been associated with rallies in shares of companies like Apple Inc and Tesla Inc.

However, not all market experts view the stock split as significant. Perri Dong from Redwood Winslow LLC argues that it serves primarily a psychological purpose, making inexperienced investors and traders feel more comfortable. Dong suggests that the liquidity of the shares does not actually matter.

In 2022, Amazon’s stock performance has faced challenges, along with other growth stocks, resulting in a 16.5% decline year-to-date as of Wednesday’s close. Despite this, analysts from BofA Global Research note that the share buybacks indicate that Amazon sees value in its stock at its current price. They estimate that the repurchases will account for approximately 0.7% of the company’s outstanding shares.

Amazon initially went public through an initial public offering (IPO) in 1997 at a price of $18 per share (adjusted for stock splits). The upcoming stock split, set to take effect on June 6, represents another milestone in the company’s history.

Despite a gloomy market where megacap companies like Apple and Microsoft Corp saw their stocks trading lower, Amazon’s surge on Thursday provided a ray of hope for investors.

Useful Links:
– Amazon Investor Relations: https://ir.aboutamazon.com/
– BofA Global Research: https://www.bofaml.com/content/boaml/en_us/home.html