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Could An Amazon Split Foreshadow Dow Jones Industrial Inclusion?

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Could An Amazon Split Foreshadow Dow Jones Industrial Inclusion?

Online retail giant Amazon.com is one of the most talked-about stocks this week with an upcoming earnings report and rumors of a share split announcement.

What Happened: Fox Business panelist Charles Gasparino tweeted Monday that, according to traders he has spoken to, an Amazon.com (NASDAQ: AMZN) stock split could be likely, with an announcement coming as early as Thursday when the company reports first-quarter earnings.

There has been no announcement from Amazon that it has explored a share split.

A share split would follow moves from some of the largest companies like Tesla Inc (NASDAQ: TSLA) and Apple Inc (NASDAQ: AAPL), both of which recently completed splits when shares traded higher.

“It’s just a rumor but if a split was announced this week, I would expect a significant rally in the shares, $300-plus,” said Dennis Dick, co-host of Benzinga’s PreMarketPrep.

Shares of Tesla and Apple traded higher after the companies announced and completed stock splits, which means the announcement of a split from Amazon could be a move to watch for investors.

"Many investors believe Bezos likes the status symbol of having a stock that trades above $3,470 a share," Gasparino and Eleanor Terrett wrote in a story for Fox Business.

Related Link: How The Dow Jones Industrial Average Changed Over The Past Decade 

Why It’s Important: A stock split by Amazon to move shares from the current $3,000-plus share price into the triple digits could make the company more appealing to be included in the Dow Jones Industrial Average.

Gasparino hinted at a possible move by Amazon into the index with a split.

Dick said this could make sense, as "the Dow is price weighted, meaning higher priced stocks have a higher weighting in the Dow.”  

The Dow Jones Industrial Average is one of the most well-known stock indexes that tracks 30 large companies.

The index’s methodology of including companies based on share price and not market cap has likely kept Amazon out of the running.

“A split solves that problem, so if a split were announced, I would expect an immediate pop and then maybe a continued move higher as traders would anticipate a likely Dow inclusion.”

The Dow Jones Industrial Average does not change its holdings on a regular basis, so a potential Amazon announcement could take some time.

Related content: Benzinga's Full Stock Split Calendar

The index made two changes in 2020, one change in 2019, one change in 2018 and one change in 2017. Some years — like 2010, 2011, 2014 and 2016 — see no changes to the index.

“A split announcement from $AMZN could be the catalyst the stock needs in a push to $5,000.”

AMZN Price Action: Shares of Amazon.com were trading 1.35% higher at $3,463.44 at last check Wednesday.

 

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