How Amazon's annual shopping event could move the Stock Price
Introduction
Amazon (NASDAQ: AMZN) just announced the dates for its highly anticipated Prime Day event.
The two-day shopping extravaganza holds great significance for both consumers and investors. Amazon's stock has seen substantial growth this year, with Prime Day offering another possible reason for optimism, but there are potential challenges and risks on the horizon worth considering before any potential investment.
Why is Prime Day Important?
Prime Day has become a major online shopping event, generating billions of dollars in sales for Amazon. Last year's event alone amassed $12 billion in sales, further cementing its importance as a revenue-driving festival.
Amazon Prime Day Sales ($ billions)
Source: Statista
With 200 million Prime members globally and 153 million in the US, Investors closely monitor Prime Day as a barometer of consumer spending habits.
When is Amazon Prime Day?
This year, Amazon Prime Day will take place on July 11 and July 12, providing shoppers extra time to plan any purchases.
The event promises deeper discounts on top brands and Amazon's product lines. Moreover, the introduction of exclusive deals for Prime members strengthens Amazon's efforts to expand its Prime user base.
How does Prime Day Affect the Stock Price?
Prime Day has historically driven substantial sales for Amazon, serving as a testament to its e-commerce dominance. The event's success is particularly crucial this year, as it reflects how households are navigating inflationary pressures. Amazon's vast product range positions it well to benefit from consumer demand for luxury goods and everyday essentials.
The inclusion of AI-generated recommendations and the expansion of AWS services are major opportunities for Amazon to enhance the shopping experience and drive customer engagement.
Consequently, a successful Prime Day could bolster investor confidence in Amazon's growth potential and contribute to an upward trajectory in the stock price. However, should Prime Day not live up to expectations, it will reflect badly on the company and could weigh on AMZN stock.
What Else Is Happening with Amazon?
Beyond Prime Day, Amazon continues to make significant strides in various areas. JPMorgan analysts predict that the company will surpass Walmart as the top U.S. retailer next year, driven by Amazon's dominant e-commerce market share.
Additionally, Amazon's proposed acquisition of iRobot for $1.7 billion has received approval from the U.K. Competition and Markets Authority (CMA), signaling potential growth opportunities.
However, the recent FTC lawsuit alleging deceptive practices in Prime subscriptions casts a shadow over the company, potentially eroding consumer trust and leading to regulatory scrutiny.
Moreover, ongoing concerns surrounding inflation, rising costs, and supply chain disruptions could impact Amazon's profitability. Investors will closely monitor these risks, which could lead to a decline in the stock price if they materialize.
Amazon Stock Fundamentals
Amazon's stock has shown substantial growth this year, rising by over 40%. Analysts remain bullish on AMZN, with a Strong Buy consensus rating based on 37 Buy ratings and one Hold.
Amazon stock price (1-year)
Source: FlowBank app
The bullishness comes despite sky-high valuations. Amazon’s trailing 12-month P/E ratio of 310x is in a different stratosphere to the sector median of 16.5x. Amazon’s price-to-sales (P/S) and price-to-book (P/B) ratios are equally high in relation to the competition. These ratios periodically come back to bite investors during market downturns but have not hampered growth in the stock over the past few decades.
The company's diverse business segments, innovative history, and potential in AI contribute to its positive outlook. While risks and challenges exist, Prime Day presents a significant opportunity for Amazon to showcase its resilience and further strengthen its market position.
Amazon's Prime Day is not only a shopping spectacle for consumers but also a crucial event for investors.
