By Lewis Krauskopf

NEW YORK, (Reuters) – Stock splits have become a popular option for large-cap U.S. corporations.

Amazon (NASDAQ 🙂 revealed a 20-for-1 stock splitting late Wednesday. This was just weeks after Alphabet, NASDAQ :), did the same.

Nvidia (NASDAQ) is another company that has split its shares since 2020.

“It’s a little bit of follow the leader,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “You had Apple, you had Tesla, and just recently you had Alphabet.”

Analysts said that while a company might decide to sell its stock, it may do so for a variety of reasons. However, investors may find a lower price more attractive.

BofA Global Research analyst said that a stock splitting “doesn’t affect company fundamentals” but it could “enhance liquidity by making shares more available to a wider variety of investors.”

BofA concluded that historical splits were bullish for those companies that implement them. The average returns on their shares was 25% one year later, compared to 9% overall.

BofA explained in the note, “Once split is completed, investors looking to increase or gain exposure may rush to get the chance to purchase.”

Analysts believe that stock splits significantly reduce the per-contract prices of trading options. This has been a trend in recent years. It can attract retail investors to the stock and increase their use, some analysts claim.

Amazon may see the split as a way of recharging stock performance. On Tuesday, Amazon shares closed at their lowest level since June 2020. They are currently down 20% from mid-November due to a wide swoon in growth stocks. Amazon shares surged nearly 6% Thursday following the announcement by Amazon of its $10 billion buyback scheme.

Amazon is still a major influencer on the market-cap weighted, having a market worth of approximately $1.5 trillion.

Investors wondered if Amazon’s stock split would open up the possibility of it being added to the, as they did with Alphabet, Google-parent Alphabet. Amazon’s current share price of $2,900 is way too expensive for blue-chip Dow. Blue-chip Dow is a price-weighted indicator, meaning high-priced stocks can have significant influence.

Splitting would lower its stock price by $145 per share. This puts it right in the middle among the Dow’s 30-member Dow. UnitedHealth Group (NYSE :), which is priced at $485 per share, would be the highest-priced component of the Dow.

“Do Google or Amazon’s managements care about becoming Dow stocks like Apple?” Nicholas Colas is co-founder and CEO of DataTrek Research. It is unlikely, purely from a financial point of view. There are very few capital indexed to Average.

Colas argued that the answer was likely “maybe” from the standpoint of corporate recognition.