For a long while, Amazon (AMZN 2.48%) has been guaranteeing us more than just fast delivery. The stock also has brought investors gains over time. Investors could pretty much count on Amazon as a stock to boost their portfolios. Amazon climbed more than 1,500% over the past decade through last year, for example.
This year, however, the Amazon story hasn't been quite the same. Rising inflation and supply chain problems have started to weigh on earnings. And the stock has lost about 30% since the beginning of the year. In fact, even Amazon's recent stock split didn't offer it a lift. So, if you're an Amazon shareholder, you may be asking yourself whether you should sell the stock right now. Before deciding, read on...
Soaring costs
First, let's talk a bit more about the reasons why you're probably tempted to sell. With inflation and worries about the economy both on the rise, Amazon's recent struggles might not be over. The retail giant can't avoid transportation costs. And those have skyrocketed. The shipping costs for international containers have more than doubled since pre-pandemic days, the company said during its first-quarter earnings call.
Amazon is trying to manage the costs it can control -- such as productivity and costs linked to its fulfillment network. But the difficult times still may continue for a while. Amazon even said it probably will face higher costs for a little longer than it initially expected.
So, it's very possible these problems will continue to hurt earnings. And that won't help the share price.
NASDAQ: AMZN
Key Data Points
Investors also may be disappointed that the stock split didn't offer Amazon an immediate lift. The stock has actually declined more than 6% since the operation earlier this month. A stock split isn't a reason for a stock to rise or fall. But it does lower the price of each individual share. And that makes it easier for a broader range of investors to buy the stock. These investors haven't flocked to the stock so far, though.
Now we know why investors might be tempted to sell shares of Amazon post-split. But there's more to this story. Let's take a look at why it's a good idea to ignore the negative sentiment and hold.
Temporary problems
Amazon's biggest problems today are external -- and they're temporary. Once the economic situation improves, Amazon has what it takes to enter a new phase of growth. And this thanks to its two major businesses: e-commerce and cloud computing.
In e-commerce, Amazon continues to add millions of members to its Prime subscription service. And the company says membership renewal rates remain high. Amazon also has doubled its fulfillment network over the past two years -- this will pay off in the future. In cloud computing, Amazon is expanding its infrastructure into new locations. That business -- Amazon Web Services -- increased sales and operating income in the double digits in the first quarter.
Of course, right now, it's impossible to predict exactly when economic troubles will ease and Amazon's growth will take off. Investors will have to be patient. But when this does happen, investors who didn't rush to buy Amazon right after the stock split may finally make their move.
So, should you sell Amazon after the recent stock split? Not if you have a long-term view. The strength of Amazon's two main businesses and their future prospects mean there could be much more to come.
