On Wednesday, Amazon (AMZN Quick Quote – ) investors received some very exciting news. The multinational tech giant shocked the market by announcing a 20-for-1 stock split and a $10 billion share buyback. The announcement was a pleasant surprise and has parallels to the Tesla strategy we saw recently (TSLA Quick Quote – ).

These two household names are known to have seen their valuations soar over the past few years due to their popularity with investors, causing the shares to become a major barrier to entry for everyday investors.

Both Amazon and Tesla have decided to take a countermeasure to address the problem – a stock split. Let's take a look at the key fundamentals of each company and whether investors should consider buying AMZN or TSLA.


In a volatile week that saw the market shake back and forth, market participants breathed a sigh of relief with Amazon's latest stock split and share repurchase announcement. The split and repurchase, which is subject to shareholder approval on May 25, will make the stock more accessible to investors and provide employees with a higher degree of stock-based compensation flexibility. AMZN has not split its stock since 1999.

Amazon posted record sales and profits in 2020, causing its stock price to soar 76%. Price action has not been as favorable in the recent term, with AMZN moving sideways and lagging the broader market. The company's -5% return last year was significantly lower than the S&P 500's nearly 10% return.

Revenue growth has cooled off recently, missing expectations in three of the last four quarters. But in 2021, Amazon still generated nearly $47 billion in revenue, an impressive 21 percent increase over the previous year's already record-breaking mark.

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AMZN's summary grew significantly along with revenue, up nearly 57 percent year-over-year. AWS is a key service driving current and future growth for Amazon, with net sales growing nearly 80 percent from 2020 to 2021.

Amazon beat expectations in the fourth quarter, beating earnings per share estimates by nearly 620% at $27.75. In the past four quarters, Amazon has beaten expectations three times, averaging an impressive 167 percent earnings per share.

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The consensus estimate trend is a good way to measure expected future performance. For FY22, the consensus estimate trend has increased 1.8% over the past 60 days, from $50.24 per share to $51.12 per share. In addition, over the next three to five years, Amazon expects to grow earnings per share by 25 percent and has an expected P/E ratio of 57.4 times.

Amazon has undoubtedly benefited greatly from the huge rise in online shopping triggered by the pandemic, as evidenced by its historic revenue and valuation growth from 2020 to 2021. Amazon's quarterly revenues have missed expectations, and this trend has recently turned negative. However, the announcement of its stock split removes all the short-term noise and does not change my long-term outlook. The company generates ridiculous revenue and shareholder value, and the stock split will bring significant trading volume and many new buyers. For these reasons, I believe AMZN will be a great addition to your portfolio.

AMZN has a Value Style score of C, a Growth Style score of A, and a Momentum Style score of C. Its overall VGM score of B is a Zacks Rank #3 (Hold).


Tesla stock is a great example of a successful stock split. Back in August 2020, the company announced a 5-to-1 split due to its ridiculously high valuation, which opened the door for more buyers and significantly increased trading volume.

With record sales, Tesla's 16% return over the past year was enough to outpace the 10% return of the S&P 500. Similar to other markets, the price action so far in 2022 has not been favorable for the electric car giant. Tesla shares have fallen 24 percent so far this year.

Tesla's revenue continues to grow every year and has impressive margins. Sales in fiscal 2021 are just under $54 billion, up 70 percent from 2020. Since 2017, Tesla's revenue has grown by nearly 360 percent, or $42 billion. The electric car maker has also posted good quarterly sales numbers, beating estimates by at least 5% in each of the last four quarters. The latest quarterly revenue unexpectedly reached double digits at 10.3 percent.

The company's net income has grown significantly, by 700% from 2020 to 2021. Total vehicle deliveries from the electric car maker are expected to grow by 50% in FY22.

As we've seen in the company's quarterly reports, consistency has always been key for Tesla. In each of the last four quarters, the electric car maker has exceeded expectations, averaging a respectable 33.3% earnings surprise.