Autozone Stock Split: AutoZone is Likely to Follow the Footsteps of Amazon and Alphabet by Announcing a Stock Split
Stock splits are back in the market and the investors are just loving it. In the last twelve months or so, various companies have announced stock splits. Whether it is overnight popular GameStop or mega-cap companies like Google parent Alphabet Inc, Amazon Inc or Tesla Inc, all have recently announced stock splits. Amazon Inc will trade post-split from early June and Alphabet Inc mid–July. Both shares trade in the range of $2800 and they have announced a 20:1 stock split, if approved by shareholders (do not have any prominent reason of not getting approved), it will bring down the share price to $140-150.
Investors are scratching their heads, as to who is next in the league of stock split and automotive replacement part chain AutoZone is one of the top contenders.
There are multiple reasons for the same but the topmost being its share price beyond $2000 (it closed at $2006.69 as of 2nd May 2022). AutoZone share has had a fabulous trading journey and it gained 184.51% in last five years out of which 36% upside came in last one year only and that has put AutoZone in the league of Alphabet and Amazon Inc, although its market cap of 39.8 Billion is way below the other examples discussed. Also, another similarity between Amazon Inc and AutoZone is that both companies went for split in the decade 1990-2000. While Amazon Inc did split stock three times between 1998-1999, AutoZone shares were split twice.
Autozone Stock Split: Stock Split History
The history of Autozone Stock Split is tabulated below: –
|S.no||Split Date||Ratio||Price (close)||Price (on the previous day)||Change|
|1||21st April 1994||2:1||27.12||52.50||3.31%|
|2||3rd Feb 1992||2:1||35.62||68.25||4.38%|
- There are two peculiar observations from the above table. First, the Autozone stock split has proved to be beneficial for the share price and it has given short-term bullish push to the price on the next day of trading post-split. On both occasions, stock shot up more than 3% indicating the strong support of investors. Remember, a stock split does not technically impact the company and its market capitalization in any way. The short term push, investors generally see post-split is a physiological effect as split makes the stock more affordable to the retail investors and those who are on the fence get lured to invest post-split as they see the share price in their range of investing and they trust owing complete shares instead of fractional shares offered by some brokers in United States.
- Secondly, the last Autozone Stock split was in year 1994, and for last 28 years’ management has ignored the topic of stock split. The trend is nothing new as most stocks in S&P 500 did almost similar and stock split did become a rare topic in last two decades after being in trend in late 1990s. As stock split is coming in limelight again with all these big companies splitting the shares, something is very peculiar with AutoZone as discussed below which sets it apart from other companies.
Also Read: Amazon stock split
Autozone Stock Split: Latest Tweet
Autozone Stock Split: Possibility of future stock split for AutoZone, Inc
While discussing the possibility of a future Autozone stock split, we will have to discuss the functioning of the company and the thought process of management to deduce the same. There are two observations for AutoZone which significantly reduces the possibility of a future Autozone stock split.
- Intensive share buy-back program- As a matter of fact, AutoZone has never paid dividends to the shareholders despite being high share price. AutoZone believes in rewarding the shareholders via share buyback program. In year 1998, AutoZone launched an aggressive share buyback program and they have continued the same for more than two decades. At the start of 1999, there were more than 150 million shares outstanding, but as of today, there are only 20.6 million shares available to exchange. Since the beginning of share buyback program, company has repurchased 86% of shares at the total cost of $29.2 billion. This year also, it has authorized $1.5 billion to repurchase the shares. Now, a forward stock split will increase the share count and erase the hard work management has put over all these years to make each outstanding share more valuable. With a share price of around $2000, it would require at least 20:1 stock split just like Amazon and Alphabet Inc, otherwise it would not serve purpose and that single stroke will take the clock back to 1998 in terms of shares outstanding and price. Board will not approve the same easily and that that masks the possibility of stock split any time soon.
- Shareholding Pattern – A company’s shareholder pattern reveals a lot about its working. For AutoZone, Inc, company’s management and investors constitute a major chunk of institutional investors and mutual fund owners. About 98% of company’s outstanding shares are owned by these big players which include institutions like Vanguard and Fidelity and they want each of remaining shares to be more valuable. A forward stock split obscures the return for these investors. They prefer less volatile daily trading and consistent growth and using cash flow to repurchase the shares. The daily trading volume for AutoZone share is only 0.18 million which is quiet less than compared to similar companies. Also, AutoZone has dealt better with the uncertain markets over the years like fear of US inflation and Russia Ukraine war due to less trading volume. We have seen shares like Netflix Inc and Meta platform shares dropping 20% post announcing the quarter results. Similar thing cannot happen with AutoZone due to less trading volume. A forward stock split will change the things squarely which is not expected to happen anytime soon.
- A number of outstanding shares- As much as AutoZone’s management like the repurchase program or less volatile environment so to say, there is little scope left to execute and continue the share buyback program. As discussed above, there are only 20 million outstanding shares remaining and company simply cannot go on to buy back the shares. A forward stock split is one of the ways to continue doing that. A 2:1 stock split will suffice to continue the program for at least couple of years down the line.
Going forward, first we will see a slowdown or break in the share buyback program, and then only there is a vague possibility of a stock split. But investors should invest in AutoZone on the merit of the company and not only due to the share purchase program. It declares over estimate quarterly results with EPS of around 22. Also, it has the good free cash flow to sustain in uncertain times. So, whether we witness a stock split for AutoZone, Inc or not, it can be considered a safe bet.
Autozone Stock Split: Latest Happenings
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