• Amazon (AMZN) stock plans 20-for-1 stock split on June 3
• Company continues to deliver strong revenue and earnings growth
• Don’t lose sight of its dominance in technology and e-commerce…choose a strategy to own it and stick to it

Amazon (NASDAQ:AMZN) stocks have been trading much better lately, with shares up 26% from the 2022 low. Specifically, AMZN stock has been trading much better since announcing its planned 20 for 1. Funny how it works, huh?

I am of the opinion that Amazon should have split its stock much sooner than it did. Apple (NASDAQ:AAPL) reached new heights on the announcement of its stock split in 2020. You’re here (NASDAQ:TSLA) also. Same Alphabet (NASDAQ:GOOGLNASDAQ:GOOG) announced a stock split earlier this year ahead of Amazon.

For years, Amazon has refused to split its stock and while that won’t change the value of its company, it is a catalyst for demand for its stock. Ultimately, remember that stock prices are determined by supply and demand. The greater the demand, the higher the stock price.

There is a time and a place for stock splits. While Amazon still operates a dominant e-commerce platform and cloud computing business, this split would have been much more timely last summer when new CEO Andy Jassy took over or again in October when Amazon published its third quarter figures.

In a bear market, it’s not exactly the best time, but it is. From there, you’re not buying AMZN stock because of the split, although that’s a welcome catalyst. Instead, you buy it because of its activity.

Remember what Amazon is

Bearish investors love to hate AMZN stocks and they always have. Ten years ago, it was because of its valuation. Now it’s because of its lack of balance sheet strength relative to Apple and Alphabet or antitrust concerns. More recently, it’s that stock splits don’t change the fundamentals (which is true).

However, Amazon has built a must-have mainstream platform. Its Amazon Prime business has an incredibly sticky moat, something consumers don’t want to be without. Last April, the company announced it had surpassed 200 million Prime members, no doubt fueled by the pandemic. This generates huge free cash flow, largely Costco (NASDAQ:COST) membership generates strong cash flow.

Incidentally, Amazon is now raising the price of Prime from $119 per year to $139. More cash.

When it comes to its balance sheet, it’s admittedly not as strong as Apple or Alphabet. However, that is no reason for do not buy AMZN stock. Instead, I watch his growth. Analysts expect revenue growth of between 15% and 17.5% in each of the next three years.

On the earnings front, analysts expect earnings to decline this year as rising costs reduce bottom line. In 2023 however, estimates call for growth of around 50%, followed by 47% growth in 2024 and 32% in 2025. If this materializes – and it’s a big “if” – then the AMZN stock could have a serious upside.

AMZN Stock Trading

Ultimately, how investors handle Amazon may be a little different from how they handle most other individual stocks outside of FAANG.

My advice would be: choose a plan and stick to it. If you want to wait for the breakout in AMZN stock before going long, wait for the breakout and a return of momentum. Some prefer to wait for a dip and/or a possible retest of the lows and that’s fine too.

Moreover, the simple dollar cost averaging (DCA) calculation in Amazon is also a fine and simple approach. When the stock eventually goes up, that stake will increase in value.

On the technical side, note how the stock continues to struggle with the 50-week moving average. Bulls need to see the stock recover to this level for a bigger rally to continue. Breakout areas to watch include $3,550 and $3,750.

On the downside, bulls need to see AMZN shares holding $3,185. Below that opens more downside, potentially down to the $2,700-$2,900 area.

As of the date of publication, Bret Kenwell had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.