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These 2 Stocks Are Capitalizing on Stock Split Benefits
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On Wednesday, Amazon (AMZN - Free Report) investors received some very exciting news. The multinational technology giant announced a 20-for-1 stock split and a $10 billion share buyback, shocking the market. The announcement was a pleasant surprise and gave off similarities to the strategy we’ve seen recently with Tesla (TSLA - Free Report) .
It’s no secret that these two household names have skyrocketed in valuation over the last several years due to their popularity with investors, causing the share price to become a large barrier to entry for everyday investors.
Both Amazon and Tesla have decided on one counter move to combat the issue – stock splits. Let’s take a look at each company’s key fundamentals, and if investors should consider buying AMZN or TSLA.
Amazon
In a week filled with volatility shaking the market back and forth, Amazon gave market participants a small sigh of relief with its latest stock split and share buyback announcement. The split and buyback, subject to shareholder approval on May 25th, will provide much easier access to investors and grants employees a higher degree of flexibility within stock-based compensation. AMZN hasn’t split its stock since 1999.
Amazon raked in record-breaking sales and profits in 2020, causing its share price to surge 76%. In the more recent term, price action has not been as favorable, and AMZN has traded sideways and lagged behind the general market. The company’s -5% return over the last year has significantly underperformed the S&P 500’s return of nearly 10%.
Revenue growth has cooled off recently, missing estimates three out of the past four quarters. But in 2021, Amazon still generated nearly $470 billion in revenue, an impressive 21% increase from the previous year’s already record-breaking mark.
Image Source: Zacks Investment Research
AMZN’s bottom line has grown remarkably alongside revenue, increasing nearly 57% year over year. Net sales for AWS, a key service of Amazon driving current and future growth, increased by nearly 80% from 2020 to 2021.
Amazon blew expectations out of the water for Q4, reporting EPS of $27.75 and topping estimates by nearly 620%. Over its last four quarters, AMZN has beaten out estimates three times, ringing in an average EPS surprise of an eye-popping 167%.
Image Source: Zacks Investment Research
The consensus estimate trend is a great way to gauge expected future performance. For FY22, the consensus estimate trend has increased by 1.8% over the last 60 days, increasing to $51.12 per share from $50.24 per share. Additionally, within the next three to five years, AMZN is expecting EPS to grow by 25% and has a forward earnings multiple of 57.4X.
Amazon no doubt benefitted immensely from the surge in pandemic-induced online shopping, displayed by its historic increase in revenue and valuation from 2020 to 2021. The trend has recently turned negative for AMZN, shown by its quarterly revenue misses. However, the announcement of its stock split mutes all short-term noise and doesn’t change the long-term picture for me. The company generates absurd amounts of revenue and shareholder value, and the stock split will bring in heavy trading volume and many new buyers. For these reasons, I believe AMZN would be a great addition to your portfolio.
AMZN has a Value Style Score of C, a Growth Style Score of A, and a Momentum Style Score of C. Its overall VGM Score is a B and is a Zacks Rank #3 (Hold).
Tesla
Tesla shares have been a great example of a successful stock split. The company announced a 5-for-1 split back in August 2020 due to its insanely high valuation, opening the gates for many more buyers and significantly increasing volume.
Riding on the back of record sales, Tesla’s 16% return over the past year has been more than enough to outpace the S&P 500’s 10% return. Similar to the rest of the market, 2022’s price action has not been favorable so far for the EV giant; Tesla shares have declined 24% year to date.
Tesla’s revenue has been increasing consistently each year, and by impressive margins at that. FY21 sales fell just short of $54 billion, notching a 70% increase from 2020. Since 2017, Tesla’s top line has jumped by nearly 360%, or $42 billion. Quarterly sales numbers for the EV maker have been good as well, surpassing estimates by at least 5% in each of its last four quarters. The latest quarterly revenue surprise was in the double digits at 10.3%.
Net income for the company saw an enormous increase, jumping 700% from 2020 to 2021. Total car deliveries for the EV maker are expected to grow 50% for FY22.
Consistency has been key for Tesla, as we can see in the company’s quarterly reports. Over the last four quarters, the EV maker has beaten estimates each time, posting an average earnings surprise of a respectable 33.3%.
For FY22, the Zacks Consensus Estimate trend has increased nearly 17% over the past 60 days, with earnings rising from $8.16 per share to $9.54 per share. For FY23, the trend isn’t as steep, up 7% to $12.79 per share from $11.94 per share. Additionally, Tesla’s expected bottom-line growth for the next three to five years is a staggering 39%.
Image Source: Zacks Investment Research
Tesla has transformed into one of the most popular and widely regarded stocks within the market. The EV space has been rapidly evolving, and companies have been clamoring to get a piece of the pie. Tesla is a pioneer within the industry, miles ahead of any other EV producer, rakes in more revenue each quarter, and has a very high expected long-term earnings growth rate. The EV market is Tesla’s to lose. For these reasons, I also believe that Tesla would be a strong addition to your portfolio.
TSLA has a Value Style Score of D, a Growth Style Score of A, and a Momentum Style Score of C. Its overall VGM Score is a B and is a Zacks Rank #2 (Buy).
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These 2 Stocks Are Capitalizing on Stock Split Benefits
On Wednesday, Amazon (AMZN - Free Report) investors received some very exciting news. The multinational technology giant announced a 20-for-1 stock split and a $10 billion share buyback, shocking the market. The announcement was a pleasant surprise and gave off similarities to the strategy we’ve seen recently with Tesla (TSLA - Free Report) .
It’s no secret that these two household names have skyrocketed in valuation over the last several years due to their popularity with investors, causing the share price to become a large barrier to entry for everyday investors.
Both Amazon and Tesla have decided on one counter move to combat the issue – stock splits. Let’s take a look at each company’s key fundamentals, and if investors should consider buying AMZN or TSLA.
Amazon
In a week filled with volatility shaking the market back and forth, Amazon gave market participants a small sigh of relief with its latest stock split and share buyback announcement. The split and buyback, subject to shareholder approval on May 25th, will provide much easier access to investors and grants employees a higher degree of flexibility within stock-based compensation. AMZN hasn’t split its stock since 1999.
Amazon raked in record-breaking sales and profits in 2020, causing its share price to surge 76%. In the more recent term, price action has not been as favorable, and AMZN has traded sideways and lagged behind the general market. The company’s -5% return over the last year has significantly underperformed the S&P 500’s return of nearly 10%.
Revenue growth has cooled off recently, missing estimates three out of the past four quarters. But in 2021, Amazon still generated nearly $470 billion in revenue, an impressive 21% increase from the previous year’s already record-breaking mark.
Image Source: Zacks Investment Research
AMZN’s bottom line has grown remarkably alongside revenue, increasing nearly 57% year over year. Net sales for AWS, a key service of Amazon driving current and future growth, increased by nearly 80% from 2020 to 2021.
Amazon blew expectations out of the water for Q4, reporting EPS of $27.75 and topping estimates by nearly 620%. Over its last four quarters, AMZN has beaten out estimates three times, ringing in an average EPS surprise of an eye-popping 167%.
Image Source: Zacks Investment Research
The consensus estimate trend is a great way to gauge expected future performance. For FY22, the consensus estimate trend has increased by 1.8% over the last 60 days, increasing to $51.12 per share from $50.24 per share. Additionally, within the next three to five years, AMZN is expecting EPS to grow by 25% and has a forward earnings multiple of 57.4X.
Amazon no doubt benefitted immensely from the surge in pandemic-induced online shopping, displayed by its historic increase in revenue and valuation from 2020 to 2021. The trend has recently turned negative for AMZN, shown by its quarterly revenue misses. However, the announcement of its stock split mutes all short-term noise and doesn’t change the long-term picture for me. The company generates absurd amounts of revenue and shareholder value, and the stock split will bring in heavy trading volume and many new buyers. For these reasons, I believe AMZN would be a great addition to your portfolio.
AMZN has a Value Style Score of C, a Growth Style Score of A, and a Momentum Style Score of C. Its overall VGM Score is a B and is a Zacks Rank #3 (Hold).
Tesla
Tesla shares have been a great example of a successful stock split. The company announced a 5-for-1 split back in August 2020 due to its insanely high valuation, opening the gates for many more buyers and significantly increasing volume.
Riding on the back of record sales, Tesla’s 16% return over the past year has been more than enough to outpace the S&P 500’s 10% return. Similar to the rest of the market, 2022’s price action has not been favorable so far for the EV giant; Tesla shares have declined 24% year to date.
Tesla’s revenue has been increasing consistently each year, and by impressive margins at that. FY21 sales fell just short of $54 billion, notching a 70% increase from 2020. Since 2017, Tesla’s top line has jumped by nearly 360%, or $42 billion. Quarterly sales numbers for the EV maker have been good as well, surpassing estimates by at least 5% in each of its last four quarters. The latest quarterly revenue surprise was in the double digits at 10.3%.
Net income for the company saw an enormous increase, jumping 700% from 2020 to 2021. Total car deliveries for the EV maker are expected to grow 50% for FY22.
Consistency has been key for Tesla, as we can see in the company’s quarterly reports. Over the last four quarters, the EV maker has beaten estimates each time, posting an average earnings surprise of a respectable 33.3%.
Tesla, Inc. Price, Consensus and EPS Surprise
Tesla, Inc. price-consensus-eps-surprise-chart | Tesla, Inc. Quote
For FY22, the Zacks Consensus Estimate trend has increased nearly 17% over the past 60 days, with earnings rising from $8.16 per share to $9.54 per share. For FY23, the trend isn’t as steep, up 7% to $12.79 per share from $11.94 per share. Additionally, Tesla’s expected bottom-line growth for the next three to five years is a staggering 39%.
Image Source: Zacks Investment Research
Tesla has transformed into one of the most popular and widely regarded stocks within the market. The EV space has been rapidly evolving, and companies have been clamoring to get a piece of the pie. Tesla is a pioneer within the industry, miles ahead of any other EV producer, rakes in more revenue each quarter, and has a very high expected long-term earnings growth rate. The EV market is Tesla’s to lose. For these reasons, I also believe that Tesla would be a strong addition to your portfolio.
TSLA has a Value Style Score of D, a Growth Style Score of A, and a Momentum Style Score of C. Its overall VGM Score is a B and is a Zacks Rank #2 (Buy).