Amazon.com (NasdaqGS: AMZN) shares advanced Tuesday ahead of an expected stock split, lifting consumer sector-related exchange traded funds.
On Tuesday, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) rose 0.7%, the Vanguard Consumer Discretionary (NYSEArca: VCR) gained 0.3%, and the Fidelity MSCI Consumer Discretionary Index (NYSEArca: FDIS) was up 0.3%.
Meanwhile, Amazon shares increased 5.1%. AMZN makes up 22.3% of VCR’s underlying portfolio, 19.7% of XLY’s, and 18.9% of FDIS’.
Amazon’s upcoming 20 for one stock split on June 3 likely played a role in the share price’s strength on Tuesday. Investors approved the stock split at the company’s annual shareholder meeting, paving the way for the share price to trade at a fraction of its current price level. Based on today’s price tag of around $2,429 per share, AMZN’s new price would be around $121 per share.
While the stock split does not directly enhance the company’s value or market capitalization, the new lower share price makes Amazon stocks much more affordable to investors, especially retail investors who were previously priced out from the $2,000 per share level. This would also improve liquidity and even create more near-term demand for the stock. Consequently, some may view a stock split announcement as a short-term upside with smaller traders picking up the stock at a more affordable entry point once the split occurs.
Furthermore, after falling off this year along with the broader sell-off in the growth style, Amazon shares may already appear cheaper for investors looking for a more attractive point to return to the e-commerce giant.
Looking ahead, Amazon CEO Andy Jassy stated that the company is focused on returning to a “healthy level of profitability” after the slowdown in retail sales and higher costs weakened its latest quarterly earnings, CNBC reported.
“We have effectively lowered our cost structure before and I have high confidence that we’ll get back on track as we work through these incredibly unusual past two years,” Jassy said Wednesday at Amazon’s annual shareholder meeting.
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