After AMZN Split: Buy, Sell, or Hold?

E-commerce giant (AMZN) completed its much-discussed 20-for-1 stock split on June 06, 2022, causing its shares to trade below $1,000 for the first time since 2017. However, given its premium valuation and rising operational challenges, is it worth owning the stock now? let’s find out. – Stocknews

E-commerce giant Inc. ,AMZN) sells consumer products and subscriptions internationally. It operates through North America; international; and Amazon Web Services. Its shares are down 39.1% over the past year and are down 36.3% year-over-year to close the previous trading session at $106.22.

AMZN completed its 20-for-1 stock split, which took effect on June 6, 2022, after being announced in March. This is the company’s first stock split since 1999 and the fourth since AMZN went public in 1997.

However, the stock did not see any significant gains. It closed its previous trading session below its pre-split price of $2000. High inflation took a toll on AMZN’s profitability in the first quarter. And according to management, the hardship could be longer than the company expected earlier in the year.

Here’s what could shape AMZN’s performance in the near future:

poor bottom-line performance

AMZN’s total net sales increased 7.3% year-over-year to $116.45 billion for the first quarter ended March 31, 2022. However, its operating income declined 58.6% from the prior-year quarter to $3.67 billion. The company reported a net loss of $3.84 billion, compared to net income of $8.10 billion in the prior-year quarter. In addition, its net cash used in operating activities stood at $2.79 billion for the three months ended March 31, 2022.

low profitability

AMZN’s trailing-12-month net income margin is 4.48%, which is 31.7% lower than the industry average of 6.6%. Plus, its trailing-12-month ROA, ROC, and EBIT margins are 7.4%, 30.6%, and 53.8%, which are below their respective industry averages. In addition, it has a trailing-12-month negative leveraged FCF margin of 1.9%, compared to its industry average of 3.41%.

premium valuation

In terms of forward non-GAAP P/E, the stock is currently trading at 128.02x, which is 1088.7% higher than the industry average of 10.77x. Also, its forward EV/sales is 2.21x, 116.5% higher than the industry average of 1.02x. In addition, AMZN’s forward price/book of 6.38x is 190.6% higher than the industry average of 2.19x.

POWR ratings reflect bleak outlook

AMZN has an overall D rating, which equates to sales owned by us power rating Arrangement The POWR rating is calculated considering 118 different factors, each factor weighted to an optimum degree.

Our proprietary rating system also evaluates each stock based on eight different categories. AMZN has a D grade for growth and value. The company’s poor bottom-line performance and low profitability are in line with the growth grade. Furthermore, its high-industry-rated value is in sync with the grade.

Out of 66 stocks in F-rated Internet Industry, AMZN is ranked 47th.

In addition to what I said above, you can check out AMZN ratings for stability, speed, quality and feeling Here,

ground level

AMZN’s e-commerce operations are expected to suffer due to supply chain bottlenecks and inflationary pressures in the current quarter. Furthermore, despite the stock split, AMZN is currently trading at a huge premium over its competitors. Therefore, we think it is best to avoid the stock for now.

How does (AMZN) stack up against its peers?

While AMZN has an overall D rating, one may want to consider its industry peer, Yelp Inc. ,bark), which includes an overall A (strong buy) and Trivago NV (TRVG), and Travelzoo (tzu), which has an overall B (Buy) rating.

AMZN shares fell $106.22 (-100.00%) in premarket trading on Tuesday. Year-over-year, AMZN is down -35.27%, while the benchmark S&P 500 index has gained -21.58% during the same period.

About the Author: Pragya Pandey

Pragya Pandey Headshot

Pragya is an Equity Research Analyst and Financial Journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a second tier candidate.


Post After AMZN Split: Buy, Sell, or Hold? first appeared