Stock splits don't do anything to increase the intrinsic value of a company. They merely break shares down into smaller pieces representing equivalent value. Tesla (TSLA -0.08%) stock gained 80% from the announcement of its 5-for-1 stock split in 2020 to its completion three weeks later, and the company's share price has continued to post explosive gains.
Of course, the gains that followed the electric-vehicle leader's last split were also aided by strong business performance. However, it seems clear the announcement and completion of its last split made a significant positive impact on the company's share price. In fact, Tesla's share price has climbed so much that it is aiming to carry out another split.
However, I think Amazon (AMZN -0.26%) stands out as a much better stock-split stock for investors to buy right now. Here's why.
An innovator in two crucial industries
After decades of incredible share-price appreciation, Amazon is on track to carry out a 20-for-1 stock split in June. With its dominant e-commerce marketplace and market-leading Amazon Web Services (AWS) cloud platform, the company has been facilitating and benefiting from some of the biggest trends of the digital age and putting up stellar performance. Revenue has surged more than 210% over the last five years, and net income has risen more than 1,640% across the stretch.
AMZN Net Income (TTM) data by YCharts
The explosive earnings growth is even more impressive because Amazon hasn't even come close to stepping off the gas when it comes to investing in infrastructure, research and development, and technology to power its long-term performance.
The company is in the midst of another big spending push to drive growth that will likely benefit long-term investors, with net spending on property and equipment surging 58% year over year in the fourth quarter to reach $55.4 billion. Massive investment initiatives will continue to cut into earnings performance in the near term, but few companies have a better track record when it comes to making smart financial decisions in service of driving long-term expansion.
E-commerce will likely always be a cost-intensive and relatively low-margin business, but Amazon's dominance in the category opens up opportunities as the business scales and paves the way for success in higher-margin categories, including advertising. Even during periods of lighter spending, the company's AWS segment has actually been the main driver of earnings growth, and that will continue to be the case going forward.
AWS revenue jumped roughly 37% last year to reach $62.2 billion, and the segment's operating income also rose 37% to hit $18.5 billion. With a roughly 30% operating margin and a strong demand outlook as business and communications increasingly rely on cloud services, the segment gives Amazon an impressive earnings growth driver that also provides synergistic benefits to the company at large.
The best stock-split stock to buy right now
With a market capitalization of roughly $1.6 trillion, I think Amazon looks much more attractively valued compared to Tesla -- which currently has a market cap of approximately $1.1 trillion. That's not to say the electric-vehicle stock couldn't deliver more big gains from current prices, but I think the e-commerce and cloud-computing giant's competitive position is much stronger and expect that it will deliver superior performance for long-term shareholders.
