Companies that lead their industry tend to have some special factor that allows them to make a larger profit than competitors. This can be exploited with higher growth rates… or by using some extra tools to ensure they hold up better than the competition during a market decline.
Such tools can come in the form of a dividend, an astute buyback, a major merger, or even splitting shares.
A share split may not change the total size of a company, but a lower price can make it easier for investors to trade shares. That may be the reason behind the 20-for-1 split just made from Amazon (AMZN).
The split took shares from over $2,400 each to about $122 each. The stock is still down nearly 25 percent from where it traded a year ago, but investors may be able to push shares higher from a lower price.
Action to take: Investors may like shares for the long haul, given the company’s reach in online retail and cloud services, among other developments that make it a solid long-term buy-and-hold candidate. Shares don’t pay a dividend… yet.
For traders, the January 2023 $150 calls, last going for about $6.85, can leverage a potential rally in shares in the latter half of the year into high double-digit gains. That would still leave shares well under their post-split high.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.