Amazon (AMZN) has split its stock following months of eagerness. Many investors seem fascinated with the chance to scoop more Amazon shares at the new, significantly lower price.
On the other side, expert investors understand stock splits don’t alter businesses’ value. They only carve the firm’s returns in more slices. Amazon’s 20-for-1 stock split equals swapping a $20 bill to receive twenty $1 bills. The value remains the same before and after the stock split.
Furthermore, intelligent investors know that the e-commerce giant faces multiple challenges that might dent profits and slow its growth. So, besides buying, is it time to sell your Amazon stock?
Amazon Struggling in Online Retail Business
Amazon has dominated the e-commerce space for a long. Its apps and websites account for over 50% of online sales in the United States. It is the same case in multiple markets globally. However, the worldwide e-commerce industry experiences slow growth.
E-commerce sales boomed as the pandemic emerged, with traditional store closures forcing individuals to buy online. However, people seem back to their desired stores as many countries lift COVID-related safety measures.
Amazon confirms these trends in its sales metrics. The firm’s online stores saw revenue plunging by 3% Y/Y to $51B in Q1, following a 44% surge during the prior year. Meanwhile, Amazon sees its costs rising as the sales fall.
Also, management spent massively double its fulfillment network to account for soaring customer demand amidst the pandemic. The company should vacate unused warehouses to trim expenses as shoppers reduce online purchases.
Moreover, Amazon revealed (on Friday) that its Worldwide Consumer CEO David Clark may resign on 1 July. The executive is responsible for Amazon’s physical retail stores, the Prime membership program, and e-commerce marketplaces.
His impending departure indicates that the company’s e-commerce struggles might persist beyond investor expectations. Moreover, fierce competitors like Microsoft and Alphabet seem to work on possible ways to remove Amazon from the top position in the cloud computing business.
Time to Sell AMZN Stock?
Selling now might be a mistake regardless of these challenges. Most of Amazon’s challenges seem transitory Shipping costs and fuel prices should moderate with time as the company shifts towards electric cars.
Editorial credit: Sergei Elagin / shutterstock.com