Yesterday’s relatively quiet trading session concluded with a BIG BANG!
And that Bang was courtesy of Alphabet! Or Google, or GOOGL, or GOOG – whichever you like most.
First, the company reported strong earnings, delivering solid beats on both revenue and EPS – in and of itself an event that brings some confidence back into the fearful market.
But it was the “under announced” part that got the traders really hyped up…
Buried in the company’s quarterly filing was the disclosure of an upcoming 20-for-1 stock split!
This means that Google’s shares will soon be priced at ~$150/sh vs ~$3,000/sh they’re trading at as of this morning.
And that paves the way for a multitude of new investors, who may have otherwise found the stock too pricey.
The optimism for new money supply runs high – GOOG is gaining over 10% in pre-market trading.
But the real question here is: What does this mean for Amazon (AMZN)? No mistake here – is Google about to send shares of Amazon higher?
Game of Numbers
Stock splits are done with a simple purpose: they make shares more liquid and affordable and, therefore, more appealing to smaller investors.
You may be unwilling to lock up $3K of your capital for a single share of Google, no matter how much you love the company.
But owning 5 shares at $150 each is a whole different story, right?
Not to mention the liquidity: volumes will go up and the spreads will shrink – it will be a lot easier and safer to get in and out of positions.
For the reasons above, it’s generally considered that a freshly split stock gets an influx of new capital and tends to move up in price.
This has surely been the case as of late, just look at the performance of the biggest recent splitters:
- Tesla (TSLA) – up over 120% post split
- Nvidia (NVDA) – up ~30% post split
- Apple (AAPL) – up ~40% post split
And mind you, all these figures account for the major selloff of the past few weeks.
Take those same names just one month ago – and the above gains become a LOT bigger!
So you see where this is going and why people are already propping up GOOGL so much in the pre-market…
With that, let’s get back to Amazon (AMZN)!
Will Amazon Split?
I just mentioned TSLA, NVDA, and AAPL – the biggest, loudest, and most-watched names out there – and there’s a reason why I bring them up.
Virtually every big stock of the past decade has split – some have done so multiple times over.
With GOOGL’s yesterday’s announcement, Amazon becomes literally the only major name out there maintaining a high share price.
And the obvious question is – can it last much longer? Or will AMZN also pull a stock split in short order?
Obviously, we can’t know the answer to that, but it sure looks like the market is betting on it and any trader should be paying attention.
Oftentimes in the market, it’s not the catalyst that drives shares higher – it’s the expectation of a catalyst.
If people believe a company is about to announce something major – they’ll be buying the shares up in anticipation.
I believe this may exactly be the case with Amazon, as the shares are getting some attention in the pre-market.
Looking at the bigger picture, hype over a potential split may be just what the stock needs to have a strong bounce:
I’ll be watching the $3,100 level closely: should AMZN get there and hold it, I wouldn’t be surprised if we have a quick short-term move to $3,300 – that’s just what the hype sometimes does!
Let’s see how this plays out over the next few days, and be sure to pay me a visit in The Octagon for live coverage of all of my trades!
