Amazon's (AMZN 0.81%) last stock split was back in 1999. That was before the launch of its subscription service, Prime, and before the start of its profit driver, Amazon Web Services (AWS). These two elements helped boost Amazon -- to a gain of more than 7,700% in a period of 14 years.
The retail giant recently announced a 20-for-1 stock split. The split is set to happen in June. This doesn't change the market value of the company. But it brings the value of each share down. And that makes it easier for a broader range of investors to buy the stock. Could this operation launch a new era of gains? I think so. Not because of the operation itself, but because of elements in the following two charts.
Image source: Getty Images.
An e-commerce leader
Amazon is an e-commerce leader. And that market has reached levels way beyond its level when Amazon last split its stock. In 1999, worldwide e-commerce totaled about $150 billion, according to a paper in ScienceDirect. And most transactions were between businesses.
The following chart shows worldwide retail e-commerce sales today and projections for the future. In 2021, retail e-commerce sales reached $4.9 trillion. And it's expected to grow to nearly $7.4 trillion in 2025.
Image source: Statista.
Now, let's consider a second chart. This one shows e-commerce as a percentage of total retail sales worldwide. Back in 2015, it was only 7.4% of total retail sales. That increased to 17.8% by 2020. And forecasts show it gaining further to 24.5% in 2025.
Image source: Statista.
The increase in the value of e-commerce sales and the fact that more and more people are buying online represent key growth drivers for Amazon. In the U.S. alone, Insider Intelligence says Amazon holds about 40% of the e-commerce market. So the company is in the perfect position to benefit from overall e-commerce growth.
Good news for investors
Now here's the good news for investors: This movement could be the key to unlock another era of gains for Amazon shares.
The company continues to invest in its Prime service to keep customers coming back. For instance, from 2018 to today, the free same-day-delivery service in the U.S. has expanded to 90 metropolitan areas from 48. The company has increased items available for free Prime shipping by 50%. And Amazon has even created Amazon Pharmacy, where members can get their prescriptions filled and delivered for free.
Everything is in place for shoppers to keep ordering on Amazon. This should lead to profit and revenue growth. And over time, more fantastic earnings reports from Amazon may lead this dynamic retail stock higher.
