Amazon (AMZN  ) is following in the steps of peers like Apple (AAPL  ) and Alphabet (GOOG  ) as it announced 20:1 stock split and a $10 billion share buyback. This is the fourth stock split in history for Amazon, and its first since 1999. Following the news, Amazon's stock was about 7% higher in ensuing sessions.

It's a well-studied phenomenon that stocks tend to rise after splits are announced even though it's irrational behavior as there is no value creation. However, some believe that lower-priced stocks lead to more demand from retail traders. The company's buyback also is an indication that management believes the company's stock is undervalued, and it's becoming a more mature company rather than constantly investing for new growth as it has done for much of its history.

This is one of new Amazon CEO's Andy Jassy's first major moves, and it's similar to Tim Cook who embraced more market-friendly policies with his dividends and buybacks. Of course, Cook has been of the most successful CEOs in history in terms of market performance.

The company said that another reason for the stock split is that it would make it easy to grant stock options and equity to employees. Amazon has been boosting compensation to retain and attract workers which could also be challenging given its notoriously tough work culture, the tight labor market, and the stock's recent underperformance.

YTD, Amazon's stock is down about 15% and is down about 22% from it's all-time high in November of this year. The major reason for selling is due to rising rates which makes tech stocks less attractive due to future cash flows being discounted. Therefore, Amazon will likely keep underperforming as long as inflation continues to accelerate.

Another concern is that there are signs of revenue growth decelerating with its last quarter marking the company's slowest rate of growth since 2001. However, one mitigating factor is that 2020's Q4 saw an explosion in consumer spending due to the pandemic and stimulus payments which created tough YoY comps.

However, on a longer-term basis, Amazon continues to get more attractive from a valuation basis. The company has a forward P/E of 40 and its AWS continues to grow at a rapid rate with high margins with no signs that tech spending on cloud services is slowing. One high-profile, activist investor, Dan Loeb, has been building a stake and sees about $1 trillion in untapped value.

Many believe this could be realized through a spinoff of its AWS business. Another factor affecting Amazon is its outsized stake in Rivian (RIVN  ) which has lost more than 50% of its value since its IPO and faces a tough road ahead like a lot of EV companies.