Connect with us

Stocks

Amazon Stock Is Likely to Recover From Its 2022 Decline Long Term

There’s a lot going on with Amazon (NASDAQ:AMZN) stock currently. But the overall thrust is that it’s a great time to invest after shares have fallen roughly 28% year-to-date — nearly 38% down at its trough. Let’s start…

There’s a lot going on with Amazon (NASDAQ:AMZN) stock currently. But the overall thrust is that it’s a great time to invest after shares have fallen roughly 28% year-to-date — nearly 38% down at its trough. Let’s start by accounting for the recent stock split news as well as the so-called retail wreck and how both positively affect the e-commerce giant.

AMZN
Amazon
$2,428.09

Advertisement

AMZN Stock Split Approved

On May 25, Amazon shareholders had a lot to vote on during the company’s annual shareholder meeting. Those shareholders voted down a record 15 proposals this year. That was big news as unionization efforts and environmental questions loom large for the firm.

  • 7 Undervalued Large-Cap Stocks to Buy for June

Shareholders also approved a proposed 20-for-1 stock split at the same time. That’s great news for current and potential investors. Shares will trade at one-twentieth the price come June 3.

As many have noted, the move doesn’t affect Amazon’s underlying market capitalization immediately. It simply increases the number of shares by a factor of 20.

Advertisement

But that’s good news because, in theory, it could lead to an increase in market cap. The shares become more affordable, which can easily drive up demand. If, for example, demand increases by 5% following the split, then AMZN stock prices will rise, which will raise its market cap.

Retail Wreck Really a Boon?

Amazon is at the forefront of the so-called tech wreck. As noted, its share prices declined by more than one-third this year before making a small recovery. As markets have soured, the retail sector has foundered as well.

Advertisement

Disappointing earnings from Target (NYSE:TGT) and Walmart (NYSE:WMT) indicate that consumer spending is entering a downturn. Big-ticket electronics sales have declined, and consumers are moving toward essentials amid historic inflation.

This phenomenon has been dubbed the retail wreck.

Advertisement

Citigroup analyst Ronald Josey believes Amazon is in a relatively strong position to gain in this environment. He stated in a research note that like other retailers, Amazon will have to deal with weaker consumption and higher costs. However, he believes it can gain wallet share due to its convenience and delivery times.

Advertisement

With gas prices continuing to increase it certainly makes sense that consumers would look to Amazon delivery rather than driving to big box alternatives.

It’s Hard to Count AMZN Stock Out

It’s very hard to bet against investing in Amazon as a buy-the-dip opportunity. Essentially, it looks like a no-brainer at this point.

Advertisement

Target prices indicate 50% upside. But those are based on projections a year in advance. That’s certainly attractive, there’s no denying it. It’s almost certainly a good time to buy shares and sit on them for a year or two.

But there’s the near-term catalyst in the form of the upcoming stock split. That should propel Amazon upward. And if Citigroup’s Ronald Josey is correct, Amazon also could reemerge as a stronger player vis-a-vis big-box retailers that have already priced in higher costs.

Advertisement

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

More From InvestorPlace

  • Stock Prodigy Who Found NIO at $2… Says Buy THIS
  • It doesn’t matter if you have $500 in savings or $5 million. Do this now.
  • Get in Now on Tiny $3 ‘Forever Battery’ Stock

The post Amazon Stock Is Likely to Recover From Its 2022 Decline Long Term appeared first on InvestorPlace.

Advertisement

InvestorPlace| InvestorPlace

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *