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Stock Investment Decisions

Franklin Mejias

Strayer University

Dr. Ahmed Rawish

Stock Investment Decisions

Current Value of Investment

Note:

Number of shares

At Amazon, Inc = 10,000/170.60

= 58 shares

Facebook, Inc = 10,000/972.91

= 10 shares

Alphabet, Inc = 5,000/991.46

= 5 shares

Assessment of Investment

So far, I am happy with the total value of current investment as it is worth more than 25,000 dollars, the initial investment by 50,137 dollars. The stock price of Amazon.com has passed the magical figure of 1000 United States dollar as it is trading at 1,173 United States dollars per share. Shell (2017) indicates that topping a stock price of 1000 dollars is not only a trophy for an organization but also a clear indication of domination and growth. In my view, Amazon, Inc. can attribute its success for dominating the retail industry and being a major player in the artificial intelligence. According to Shell (2017) Amazon.com Incorporation can attribute it success for being a significant player in the cloud computing business, which is one of the fastest growing businesses. However, when the stock prices get very high it is less affordable for many investors. With this in mind, I foresee Amazon.com incorporation splitting its shares to make it more affordable for investors and to increase its pool of shares. Shell advices that in this situation, a firm should split its shares to make it affordable as Apple did in 2014. The company split its stock in the ratio of 7 is to 1 thereby increasing its pool of by seven times as well as reducing each stock’s price from nearly 645 dollars to 92 dollars (Shell, 2017).

Facebook Incorporation is currently trading at around 182.3 United States dollars, which is a sharp decline from the 972.91 United States dollars. This in my opinion occurred because of the company’s declining revenue growth as well as huge investment plans. Investors are spooked by the firm’s aggressive investment plans that would lead to slower revenue growth. Reuters (2016) indicate that apart from the company’s investment plans in talent as well as data centers, investors were also scared by the ad load comments. In fact, the company expected modest growth in ad load, which would lead to lower revenue growth rates in second quarter of the year 2016. In my view Facebook’s share price will continue to rise despite the decline and is, therefore, a worthy investment option. This is because of the company’s healthy financial position. Reuters (2016) shows that Facebook has surpassed its revenue estimates for the three quarters of 2016 because of its strong ad revenue. Hence, it is evident that the company is performing better than expected. This has tremendously increased the company’s stock prices. According to Reuters (2016) Facebook’s stocks traded at approximately 34 times forward 1 year earnings compared with Apples Incorporations of 13.5 and Alphabets Incorporation’s 23 times.

Alphabet Incorporation’s stock price increased from 991.46 United States dollars to 1,056 United States dollars, thereby joining Amazon.com whose shares sell at 1,173 United States dollars. In my opinion, the company can attribute this massive achievement to increased market share by expanding to the grocery industries. However, like Amazon’s case Alphabet Inc., rising share prices can benefit a firm. However, when shares become too costly, like Amazon’s, they can be affordable to institutional investors instead of individual investors. Masunaga (2017), in her acknowledgement asserts that reaching the 1,000 dollar mark is a key achievement but an arbitrary achievement with no significance. Like Amazon Inc., I foresee Alphabetic Inc., splitting its shares to make it more affordable for investors and to increase its pool of shares.

References

Masunaga, S. (2017, June 5). Alphabet's share price hits $1,000. Los Angeles Times. Retrieved from. http://www.latimes.com/business/la-fi-tn-alphabet-stock-20170605-story.html

Reuters. (2016, November 3). Why Facebook's stock drop makes it a better buy. The Fortune. Retrieved from. http://fortune.com/2016/11/03/facebook-stock/

Shell, A. (2017, May 30). Amazon joins '$1,000 stock club' and Alphabet creeps closer. USA Today. Retrieved from. https://www.usatoday.com/story/money/markets/2017/05/28/1000- stock- club/102188098/