Amazon gets first dance with $1,000 share price
The technology sector’s remarkable run on Wall Street this year produced a new milestone Tuesday as Amazon.com shares sold for $1,000 for the first time.
The Internet superstore has seen its share price double in less than two years, a period in which the Seattle company’s rapid growth around the world has upended the shopping, entertainment and data storage industries.
Hovering around the rarefied $1,000-mark will do little to change Amazon’s day-to-day business, but it could boost the company’s cachet and free it from some stock-market volatility.
“For a lot of consumers and investors, the checkered flag has been waved,” said Ryan Jacob, whose firm Jacob Asset Management specializes in tech investments. “Amazon is the dominant player in retail today, and it’s hard to imagine anyone having the resources to catch up.”
Just four U.S.-listed companies trade for more than three figures, though Google parent company Alphabet Inc. is nearing its first taste of $1,000 too. On Tuesday, Amazon traded as high as $1,001.20 before closing at $996.70, up 92 cents; Alphabet closed at $996.17, up $2.90.
At such high prices, shares of Amazon and Google are drawing additional scrutiny. There are concerns that prices will soon flatten and that too much growth concentrated on too few companies could squeeze out upstarts.
The tech giants’ shares also may be unaffordable for mom-and-pop traders picking up individual stocks. As the Internet sector boomed in the 1990s, many companies (including Amazon) split their stock to lower the price of a single share while still allowing shareholders to maintain the same percentage of ownership.
Finance experts say stock splits have fallen out of favor in the latest tech-stock frenzy. Individual investors are flocking to funds that hold a basket of stocks, such as exchange traded funds that mirror an index, rather than making bets on individual companies.
Mutual funds and other big money managers care little about price after deeming a company fairly valued. And high prices give the impression that people are getting something premium. Amazon founder and Chief Executive Jeff Bezos reportedly told shareholders this month that a split isn’t in the works.
Those who do get priced out may not be the type of long-term investors Amazon wants anyway. Higher-priced stocks often change hands less frequently than comparable lower-priced ones. That helps companies weather market fluctuation.
“If an institution is going to buy $5 million worth of Amazon … they certainly don’t care if they buy 5,000 shares of a $1,000 stock or 50,000 shares of a $100 stock,” said Michael Pachter, managing director for equity research at Wedbush Securities.
Amazon’s rise on Nasdaq, and that of the technology sector in general, would seem to reflect that sentiment. Though nearly every sector except energy has ridden a post-election wave in recent months, the tech sector has topped the charts.
Shares of Facebook, Amazon, Netflix and Google (via Alphabet) — a collection of powerful consumer Internet companies referred to as FANG — have increased about 30% this year. By comparison, the Standard & Poor’s 500 market index has grown about 9%.
The amount of investment going into tech-sector funds is growing at the fastest annualized rate in 15 years, according to Bank of America Merrill Lynch research released this month.
The firm noted Tuesday that survey results show big investment funds managed by expert stock-pickers continue to hold about a third more tech shares than is historically common.
Investors have been attracted to Facebook and Alphabet because they’re grabbing advertising deals away from old-media operators such as newspapers and TV stations. Netflix has rallied on the back of international subscriber growth. Even Apple has bounced back with strong sales after fears last year that the iPhone, lacking major innovations, was losing appeal.
But when it comes to growth and potential, analysts see Amazon in a unique and enviable position.
“Amazon remains our favorite idea for new money,” BMO Capital Markets analyst Daniel Salmon wrote to investors last month, estimating that shares could reach $1,200 in a year.