Jeff Bezos gets richer, Amazon Prime Members get deals, but shareholders get nothing? That’s how it’s been the last two-years. Since 2017, three months after Prime Days, Amazon’s stock essentially finished where it started.
The initial reaction to 2019’s impressive results hasn’t been good either as AMZN has been nothing but red since Prime Days started on July 16, 2019.
This year’s Prime Days are over, and the results are in. The monster online retailer announced that members bought 175 million items during the 36-hour event. Management says sales blew by 2018’s Black Friday and Cyber Monday, combined! BOOM.
Amazon CEO Jeff Bezos said, “Members purchased millions of Alexa-enabled devices, received tens of millions of dollars in savings by shopping from Whole Foods Market, and bought more than $2 billion of products from independent small and medium-sized businesses.”
Alright, so one of the richest men in the world is going to fatten his already obese bankroll, but what does that mean for stockowners?
As we mentioned up top, it’s not been a good post-sale run recently, so let’s look back at the previous four Prime Days to see how AMZN’s shares fared in the aftermath of the super sale.
- The first Prime Day sale was on July 15, 2015. On that day, the stock opened at $463.04 and closed at $461.19. Three months later, AMZN finished trading on October 15, 2015 at $562.44, up 21.95%.
- Prime Day two was Saturday, July 12, 2016. The following Monday, the stock started trading at $735.49. Again, stock owners celebrated three months later with AMZN closing at $822.91 on October 14, 2016, a gain of 11.89%.
- In 2017, the sales event added a day, offering deals on July 10th and 11th. Initially, the stock rocked, jumping from $985 on the 10th to $1,043.20 by July 16th’s close. However, it was downhill from there. On October 10, 2016, the stock closed at $987.20, basically breakeven.
- Last year, the two-day shopping free-for-all commenced on July 16 with Amazon stock opening trading for the week at $1,821.95. It was mostly straight up from there, peaking at a closing price of $2,026.50 on September 4, 2018. Tank city from there, the stock fell to $1,171.90 on October 11, 2018 and finished at $1,819.96 three days later. Again, breakeven for shareholders.
Investors will get more flavor on Prime Day’s impact on Amazon’s bottom line when the Retail giant reports its second quarter financial results after the market closes on July 25, 2019. Analysts believe the company will earn $5.58 per share on $62.46 billion in revenue. According to our analysis, we forecast earnings between $6.00 and $6.04 per share.
A positive earning is no big surprise as Amazon recorded seven quarters in a row of bottom line profits that exceeded Wall Street’s consensus expectations. The question is “how will the stock perform?” Answer: shares stepped backwards the last two June quarterly checkups.
Last year, the price slipped a mild 2.48% and 3.12% the year before in the days surrounding second quarter results. However, Prime Days’ impact won’t show up until the company reports its third quarter numbers. So, management’s third quarter guidance will tell the story.
Past is prologue. Since Amazon started the Prime Day sales, it has delivered much better than expected profits in four of its five third quarter announcements. As it stands now, the street projects third quarter sales of $67.29 billion with earnings-per-share of $6.69. 3 We would not be surprised to see AMZN’s management up those numbers a touch in their forward guidance.
Long-term investors who want to profit from e-commerce shouldn’t be too concerned with AMZN’s recent lackluster performance in the three months following prime days. According to Shopify, Amazon is the only ballgame in town. They report “ecommerce’s spread is slowing, 80% of 2018’s gains belonged to Amazon.”
Amazon owns the dominant e-commerce position. With that in mind, market players with a longer term time horizon might consider using any weakness in the months following Prime Days to initiate new positions.