Amazon Stock (AMZN) Price Guide: What Drives Amazon's Share Price?

Founded in 1994, Amazon (AMZN) has become a behemoth in the e-commerce industry, disrupting traditional retail and expanding into other industries such as cloud computing, streaming services, and more.

Let's explore Amazon's origins and early growth, its dominance in e-commerce and its expansion into new sectors, as well as the key factors that can influence Amazon's share price:

TL;DR

• Amazon is an e-commerce giant that has expanded into other industries such as cloud computing, artificial intelligence and machine learning, streaming, and online advertising, among others.
• The company is among the largest companies in the world, by market capitalisation.
• Amazon shares have been listed on the Nasdaq since its Initial Public Offering (IPO) in 1997.
• As of May 2024, Amazon implemented 4 stock splits with the first being in 1997.
• Amazon's stock price can be influenced by a range of internal and external factors impacting its financial performance, such as competition, changes in online purchasing habits, regulatory scrutiny, and earnings, among others.

What Is Amazon?

Amazon's story began as an online bookstore named "Cadabra" in the beginning of the 1990s. Back then, innovative features like customer purchase recommendations (a precursor to data analytics) set it apart from traditional bookstores. This customer-centric approach remains a core value to this day.

For founder Jeff Bezos, books were just the first chapter as Amazon has since then transformed into a global e-commerce giant, offering everything from kitchenware to computers, costumes and cosmetics.

By the year 2024, Amazon went beyond its e-commerce roots, evolving into a true tech giant. Recognizing the limitations of a single revenue stream, Bezos spearheaded a strategic diversification beyond online retail to having a presence in:

• Cloud Computing: Amazon Web Services (AWS) provides scalable and on-demand cloud computing solutions.
• Artificial Intelligence (AI) and Machine Learning (ML): Amazon develops AI solutions through its AWS services. The firm also integrates AI and ML to various applications in its everyday business.
• Advertising: Amazon Advertising offers targeted advertising solutions to businesses, especially in its marketplace.
• Entertainment: The company has a vast entertainment portfolio that includes Amazon Prime Video, Amazon MGM Studios, IMDb, Twitch, Amazon Music, and Amazon Audible.
• Hardware: From Kindles and Echos to Fire TVs, Amazon has developed a range of consumer electronics.

Additionally, the company made several strategic acquisitions over the years to bolster its reach and offerings, like Whole Foods in grocery retail and PillPack in online pharmacy.

A Look at Amazon's Share Price Evolution

Amazon's stock price has experienced a wild ride since its IPO in 1997. Here's a look at some key milestones:

• Early Rise (1997-1999): Between its IPO and December 1999, Amazon's share price surged from $0.0750 to $4.36, a 5,716.74% increase. This rapid growth fueled by the dot-com bubble eventually burst.
• Dot-com Bust and Recovery (2000-2008): The dot-com market crash sent Amazon's stock plummeting by over 93%. However, the company displayed resilience, gaining 859.96% between September 2001 and October 2003. After a period of consolidation and decline, Amazon rebounded again by 211.81% by January 2008.
• Financial Crisis and Strong Growth (2008-2021): The financial crisis of 2007 weighed on the e-commerce giant. After bottoming in November 2008 at $1.73, Amazon's share price enjoyed a near-continuous rise until December 2021. This period saw a remarkable 10,122.03% gain, pushing the price to around $177 per share.
• All-Time High and Volatility (2021-May 2024): Potential overvaluation and tightening interest rates in the United States presumably caused a correction between December 2021 and December 2022, with the stock price dropping 52.81% to $84. However, Amazon stock has made a significant comeback since then, surging over 120% between December 2022 and May 2024. In May 2024, Amazon reached a new all-time high of $191.70 during the trading session of May 9th, closing at its highest closing level ever at $189.50.

Amazon Stock Split History

Throughout its history, Amazon has undergone four stock splits:

• Split of 2022: On March 9, 2022, Amazon announced a significant 20-for-1 stock split, effective on June 3, 2022. This means that for every 1 share of Amazon stock traders held before the split, they received 20 shares after the split.
• Earlier Splits (1998-1999): Prior to the 2022 split, Amazon enacted three additional stock splits:
  • A 2-for-1 split in June 1998
  • A 3-for-1 split in January 1999
  • A 2-for-1 split in September 1999

Why Does a Company Generally Decide to Implement a Stock Split?

Companies with expensive share prices sometimes use stock splits, which essentially divide their existing shares into a larger number of lower-priced shares. While the total value of the company stays the same (think of it like cutting a pizza into more slices), there are some benefits of using a stock split, such as a cheaper stock price, increased liquidity, wider accessibility, and a psychological appeal for traders.

What Happened to the Amazon Stock Price with the Stock Split of 2022?

In the lead-up to Amazon's 20-for-1 stock split in 2022, anticipation was high among traders, as the share price surged nearly 8% in the 5 days preceding the split. This pre-split price increase highlights trader excitement about the event and the potential for increased accessibility after the split.

Following the split, the share price was revalued at around $120, making it more affordable for a wider range of investors, given that it was worth well above $2,000 per share before the split.

What Are the Potential Drivers of Amazon Share CFD Prices?

Trading Contracts For Difference (CFD) is like having a financial contract with your provider allowing you to speculate on the difference between the opening price and the closing price of your trading CFD positions on Amazon, whether you trade rising or falling market prices.

It's also important to note that when you use CFDs on Amazon shares, you do not own the underlying shares. Additionally, by using CFD stock trading, you can use leverage and margin, which means that you can start with a relatively small amount of capital. However, it also means that all price movements will be amplified. Your potential profits and losses can therefore be magnified.

Because Amazon's share price can be influenced by various factors, you should be aware of them before getting into Amazon CFD trading. Let's get a closer look at some of them:

Earnings Releases

The earnings season is a critical time for stocks like Amazon. It offers a window into a company's financial health over the past quarter, with strong earnings reports often triggering buying sprees and weak reports potentially leading to sell-offs. This direct impact on investor sentiment can cause significant fluctuations in Amazon's share price.

Exchange Rates

As a global company with a significant presence outside the United States, Amazon's performance is heavily influenced by the Forex market. Fluctuations in key currency pairs, particularly those of major markets like Germany (EUR/USD) and the United Kingdom (GBP/USD), can impact its bottom line.

Favourable exchange rates can boost Amazon's profits by making their US-dollar denominated sales more valuable when converted back to local currencies. However, unfavourable currency movements can have the opposite effect, eroding profits when converting international sales back to US dollars.

Competition

Amazon faces a growing challenge from competitors like Walmart (WMT) and Target (TGT). These established players have significantly improved their e-commerce offerings, making their online shopping experience more seamless and competitive for consumers. This intensified competition can put pressure on Amazon's market share and ultimately, its stock price.

Beyond the retail sector, the competitive landscape for Amazon extends to competition in cloud computing (Microsoft (MSFT) Azure), artificial intelligence (Google (GOOG) AI), and streaming services (Netflix (NFLX), Disney+ (DIS)), all of which can impact its overall growth and profitability.

Trends in the E-Commerce Industry & Changes in Online Spending Habits

The e-commerce landscape is in constant flux, driven by evolving consumer preferences and spending habits. This presents both opportunities and challenges for Amazon.

While trends like the rise of social commerce and voice search offer new avenues for growth, they also require Amazon to adapt its strategies to capture these changing spending habits. Additionally, a focus on sustainability and ethical sourcing aligns with a growing desire among consumers to spend responsibly.

Depending on Amazon's strategy, agility and responsiveness to the changes in e-commerce trends and online spending habits, the company can solidify or weaken its position in the ever-changing world of online retail, which can ultimately influence its stock price.

Innovation & Acquisition Strategy

Amazon's relentless pursuit of innovation and strategic acquisitions can be a potential key driver of its stock price rise.

By fostering a culture of experimentation that has produced breakthroughs like Alexa and the Kindle, the firm can capture traders’ imagination and demonstrate its ability to disrupt markets. Even failed ventures like the Fire Phone show a willingness to take calculated risks, a quality some traders value.

This innovative spirit extends beyond internal development - acquisitions like Whole Foods (grocery market), Kiva Systems (warehouse automation expertise), PillPack (online pharmacy services) and Anthropic (advanced generative AI) allow Amazon to potentially expand its reach and capabilities.

These strategic moves not only fuel immediate growth but also signal Amazon's commitment to long-term dominance, factors that can entice traders and potentially boost its stock price. Additionally, they tend to strengthen the position of Amazon as a powerful vertically integrated company.

Regulator Scrutiny

Amazon's diverse business ventures can attract the attention of regulators and antitrust authorities, which can impact the company's operations, competitive edge, and public image.

An example is the April 2024 concern raised by the UK's Competition and Markets Authority regarding potential anticompetitive practices in the AI industry due to deals made by both Microsoft and Amazon.

Big tech companies like Google, Meta, and Amazon frequently face criticism for allegedly using anticompetitive tactics to dominate their markets. These strategies, if proven true, could harm consumers and third-party businesses that rely on these platforms.

Speculation & Volatility

Unlike investments based on a company's current financial health, speculators buy and sell stocks based on future expectations, usually over the short term. This means that speculation often amplifies the natural volatility of growth stocks like Amazon, which are typically companies with high potential for future earnings but may not be currently profitable (or whose profitability is relatively weak).

Speculative buying and selling can cause Amazon's share price to experience significant fluctuations based on news or even rumours, as well as the predominant market emotion (positive speculation due to optimism vs negative speculative due to fear, panic or negativity). This volatility can be attractive to some traders, but it also carries a higher risk of sudden losses.

If you'd like to learn more about how to trade Amazon stock now that you’re aware of what can influence its share value, take a look at our article 'Amazon Trading Guide: How to Trade Amazon Shares CFDs'

Amazon Stock Price Prediction

Predicting the exact future price of any stock, including Amazon, is impossible. However, by considering the factors we've discussed, you can gain a deeper understanding of the forces that can drive Amazon's price movements.

This knowledge can empower you to potentially make more informed trading decisions, whether by buying Amazon shares when you expect a potential price growth or considering short-selling strategies when you forecast a potential price fall.

Traders can gain valuable insights into market sentiment and professional perspectives by analysing ratings and target prices from institutional analysts.

These ratings, often categorised as 'buy,' 'hold,' or 'sell,' are issued by financial institutions like Barclays (BARC-L), Deutsche Bank (DBK.DE), HSBC (HSBA-L), UBS (UBSG.VX), Wells Fargo (WFC), Morgan Stanley (MS) and JPMorgan (JPM).

As of May 2024, Amazon enjoys a 'strong buy' rating from analysts, with an average target price of $220.6. This target range, with a high of $246 and a low of $200, provides a snapshot of where professional analysts believe the stock might be headed.*

* Past performance is not indicative of future results. Analyst opinions should be considered alongside other factors in your investment decisions.

Now that you're aware of the various factors that can influence Amazon's stock price, you can consider trading Amazon share CFDs with Plus500.

Amazon Share Price — Frequently Asked Questions (FAQs):

Where are Amazon's shares listed?

Amazon went public on the NASDAQ stock exchange under the 'AMZN' symbol. As of 2024, it's a key component of the most traded indices like the Nasdaq 100, the S&P 500, and the Dow Jones Industrial Average.

What is Amazon's IPO date and price?

Amazon's IPO was on May 15th, 1997, and offered shares at $18.00. Adjusted for stock splits throughout the years, in 1998, 1999, and 2022, that translates to a mere $0.075 per share.

Does Amazon distribute dividends?

Following the strategy of many growth stocks, Amazon prioritises reinvesting all profits back into the business to fuel future expansion, which means that it doesn't distribute any dividends.

How can I trade Amazon's shares?

In addition to buying direct shares of Amazon, traders can use various financial products to get exposed to Amazon share price's fluctuations such as Exchange-Traded Funds (ETFs) that include Amazon stock and CFDs on Amazon.

What are Amazon's trading hours?

Retail investors can typically buy and sell Amazon shares during standard US stock market hours, weekdays from 9:30 am to 4:00 pm Eastern Time (between 1:30 PM GMT and 8:00 PM GMT)*.

*Amazon CFDs trading hours may differ. Check the specific hours offered by Plus500 before trading on the Plus500 trading platform