com seems interested in enhancing its image on Wall Street. Washington may demand more ingenuity.
A stock split and share buyback announced late Wednesday shows the tech giant is working on the former. Amazon hasn’t split its stock since 1999, and before this year, hasn’t repurchased any shares since 2012.
The new $10 billion buyback plan replaces the $5 billion plan from 2016. That original plan went unused until Amazon began buying back stock in January. The company said in a filing Wednesday that it has repurchased about $2.1 billion worth of its own stock, which has plummeted over the past year.
Meanwhile, the 20-for-1 split will make Amazon’s stock more accessible to a growing number of retail investors and give the company’s own employees more flexibility, which currently has more than 1.6 million, manage their equity in the company. It could also make the stock, which has spent most of the past 12 months above the $3,000 range, a candidate for inclusion in the Dow Jones Industrial Average. If enacted now, the split would put Amazon’s stock price just below the current average of the weighted index.
Alphabet, Google’s parent company, announced a similar split in February, and the two, with a combined market value of $3.2 trillion, are the largest public companies based in the United States. not currently a member of the Blue Chip index.
Taken together, Amazon’s latest moves form “part of a string of increasingly shareholder-friendly actions,” according to Morgan Stanley’s Brian Nowak..
The company recently raised the price of its Prime service and began disclosing the financial details of its advertising business, which generates more than $31 billion in revenue a year.
John Blackledge, an analyst at Cowen,
notes that a buyback “could also signal that (Amazon) has entered a downward phase of its historic investment cycle,” potentially leading to improved earnings and cash flow. Shares of Amazon rose 5.4% on Thursday despite the market-wide sell-off.
Amazon has long shied away from methods that are typically appealing to Wall Street, as longtime founder and CEO Jeff Bezos often maintains that focusing on the customer and maximizing free cash flow will serve investors better in the long run. And he was as good as his word; Mr. Bezos even stayed away from Amazon’s quarterly earnings calls from 2009 until handing the CEO over to his successor Andy Jassy last July.
Mr. Jassy had a rough welcome. His appointment coincides with a dramatic drop in sales growth as Amazon began to boom at the start of the pandemic. Meanwhile, a flurry of new investments to enable services like one-day delivery have weighed on Amazon’s operating profit margins at a time when investors are squeezing out stocks. Riskier is considered to be lack of earnings leverage.
Even with Thursday’s rally, Amazon’s stock price is down 13% from when the CEO transition was announced last February. Big tech companies like Microsoft and Apple have gained an average of 18% during that time, while the S&P 500 has gained 11%.
A more shareholder-friendly Amazon could help turn that sentiment around, especially as the company enters a phase of slower growth, better suited to a business that is about to pass $500 billion in annual sales. . But Mr. Jassy also needs to figure out how to channel that sentiment to Washington, which took a particularly dim view of Amazon later this year. The Wall Street Journal reported on Wednesday that the House Judiciary Committee sent a letter to the Justice Department seeking an investigation into Amazon for potential obstruction of Congress, a move that The move was not taken against other tech giants that are being investigated by lawmakers for alleged anticompetitive behavior.
Amazon, which denies the claim, is aiming to finalize its MGM purchase with Washington soon and perhaps wants the option of making more deals as cloud rivals Microsoft and Google pursue deals of their own. . Achieving that might take something that even $13 billion can’t buy — seduction.
Write letter for Dan Gallagher at firstname.lastname@example.org
Edit & Amplify
Amazon’s new $10 billion stock buyback plan replaces the $5 billion plan approved in 2016. An earlier version of this article incorrectly stated that the new plan adds supplement the older plan. (Fixed on March 11)
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https://www.wsj.com/articles/amazons-charm-offensive-needs-to-expand-11646998380?mod=rss_markets_main Amazon’s charm offensive needs to be expanded