Will Amazon and Tesla recover with the emergence of their stock splits? | newsletter

Important points

  • Amazon and Tesla shares have fallen sharply in recent months.
  • The proposed stock split has the potential to act as powerful growth drivers for distressed stocks.
  • The core businesses of Amazon and Tesla are the main long-term drivers for both stocks.

Ugh, this is probably the best summary – and the most succinct one – of what happens to contributors to Amazon.com (WKN: 906866, -1.40%) and Tesla (WKN: A1CX3T, -0.87%) Currently underway.

Amazon stock is down nearly 40% from its 52-week high. Tesla doesn’t do all that bad, but it’s still about 30% down from last fall’s peak.

Some investors may be tempted to deal with former VIPs. On the other hand, others may mark certain dates in their calendars in the hope of a short-term boom. With Stock Splits Coming, Will Amazon and Tesla Stock Rebound?

behind the slopes

To estimate the probability of return, one must first understand why this is necessary in the first place. There are at least a few commonalities behind the decline of these two well-known stocks.

A significant move away from growth stocks began in the last quarter of 2021. Amazon and Tesla both felt this trend. At first, Tesla fell more than Amazon. Investors’ concerns about rising interest rates and inflation also affected both stocks. However, there are also unique factors that have caused the stock to drop.

Amazon shares fell after the company reported its worst quarterly results in years on April 28. The big net loss for the internet giant was on investing in the electric car maker Rivian attributed. But investors were also disappointed by the slowing growth of e-commerce at Amazon.

Meanwhile, Tesla reported impressive first-quarter results on April 20. However, the company also warned of ongoing problems in the supply chain. Worse, investors weren’t excited about Tesla CEO Elon Musk’s prospects Twitter takes over.

Stock split as a rescue?

The planned stock splits announced by Amazon and Tesla do not change the dynamics described above. Investors can still avoid growth stocks. It is almost certain that interest rates will continue to rise. Inflation is likely to remain high. The unique factors responsible for the decline in stocks will not be affected.

However, do not exclude that the ability to buy Amazon and Tesla at much lower prices will not tempt many investors. On June 6, Amazon shares will split at a ratio of 20:1. We don’t yet know what the split ratio will look like for Tesla.

Both stocks performed well after the previous stock split. Amazon has already carried out three stock splits in the past. The company’s shares rose at least 48% in the weeks following each split. Tesla split the shares at a 1:5 ratio on August 31, 2020. Although the shares initially fell, they rose strongly, and Tesla rose more than 40% over the next four months.

There is no guarantee that any of the shares will achieve similar results in subsequent splits. There’s also no guarantee when Tesla will split its stock. The timing of the stock split is at risk after the company misses the regulatory deadline for filing a proxy statement.

Three predictions

I agree 100% with the phrase often attributed to physicist Niels Bohr: “It is very difficult to make predictions, especially about the future.” However, I have three predictions that I will throw out the window.

First, despite the delay in providing the dealer’s statement, I believe Tesla will go ahead with the stock split. I expect the company will do a 10-for-1 stock split sometime this year.

Second, I expect Amazon and Tesla to post at least modest gains after their respective stock splits. However, given the uncertain macro environment, I don’t want to speculate how long these rallies will last.

Third, I expect that ten years from now (and possibly soon) most investors will have forgotten the current crisis affecting both stocks and stock splits in 2022. The real driving force for both Amazon and Tesla is their long-term business prospects. Despite the current downturn, I see these odds as good for both companies.

Article Will Amazon and Tesla rebound as their shares approach? He debuted on The Motley Fool Germany.

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John Mackie, CEO of Whole Foods Market, an Amazon company, is a member of The Motley Fool’s Board of Directors. This article was written by Keith Speights and published on Fool.com on 5/8/2022. It has been translated so our German readers can join the discussion. Keith Spits holds positions at Amazon. Motley Fool owns and recommends shares in Amazon, Tesla, and Twitter.

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