Does Prime Day Impact Amazon’s Stock (AMZN)?

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Amazon (AMZN) is one of the most valuable companies in the world, with a market capitalization exceeding one trillion dollars. One-way AMZN has continued to grow is by introducing new products and acquiring complementary businesses. One such product is Amazon Prime. This membership service gives subscribers certain perks like free two-day shipping of products, access to movies, music and more. Amazon Prime’s popularity encouraged AMZN to add another perk to reward its members. In July 2015, to celebrate 20 years of being in business, Prime Day was created.

The first Prime Day lasted for 24 hours and included nine countries. AMZN reported that the next Prime Day, which was on July 12, 2016, saw subscriber offers jump 60% from the prior year. The success of Prime Day led to AMZN extending the sale in 2017 to 30 hours. In 2018, AMZN added more markets and extended the sale to 36 hours. By 2019, AMZN had expanded the sale to include more countries and to two full days. In its 2021 letter to shareholders, AMZN reported that it had 200 million Prime members worldwide. In each of the years since Prime Day’s inception, gross merchandize sales have increased, growing from $0.9 billion in 2015 to $12.09 billion in 2022.

Key Takeaways

  • Prime Day was launched in July 2015 to celebrate 20 years of being in business.
  • In 2021 AMZN had 200 million Prime members worldwide.
  • As a trillion-dollar company, with annual revenue of almost half a trillion dollars, Prime Day’s sales of $12 billion in 2022 are not likely to have a significant impact on the value of the company as a whole.

With such impressive sales numbers, it is interesting to look at whether opportunities for short term traders to take advantage of any bump in share price caused by the effects of Prime Day sales exist.

A look at AMZN’s daily price chart since the beginning of the century shows that AMZN had been in an impressive uptrend well before the launch of Prime Day in 2015. In fact, if we were to look for bumps in share price as a result of Prime Day sales, the result would likely be insignificant at best. As a trillion-dollar company, with annual revenue of almost half a trillion dollars, sales of $12 billion are not likely to have a major impact on the value of the company as a whole.

Below is a daily price chart of AMZN showing its price action for the last twenty years. On a price adjusted basis, AMZN was trading at $0.80 at the close of trading on July 15, 2002. By close of trading on July 15, 2022, the adjusted stock price was $113.55 for a price increase of 14,040%.

AMZN’s Performance Before and After Prime Day Began

Online consumer portals have become essential to life in modern society and Amazon.com is perhaps the most influential of them all. So, while it’s no wonder that early investors in this company have been handsomely rewarded over the years, many traders are surely curious to know if there are still opportunities to profit from the effects of Prime Day.

There have only been eight Prime Day sales events which constitutes too small a number to reach any statistically significant conclusions. But nevertheless, it is an interesting exercise to look at the stock price before and after Prime Day for any short-term tradable price action.

If you were to buy the shares of AMZN at the close on the day prior to the first day of AMZN Prime Day sales and hold for a period ranging from 1 day, 5 days (one week) and 20 days (one month) after Prime Day would there be any appreciable difference in price from the period a month earlier?

AMZN Prime Day Short-Term Returns

The first table below shows the profits or losses to be gained from buying shares of AMZN at the close prior to Prime Day and then selling at the close 1 day, 5 days (one week), or 20 days (one month) after Prime Day. The results are not impressive and produce a combined loss for all time periods. If your trading strategy had been to buy at the close the day before Prime for the last seven years and sell one day, one week or one month later. Each time period results in negative returns.

The second table moves the time that shares are purchased approximately one month before prime day in each of the seven years. This is to provide a comparison of a random time frame. We can see that this random time period produces slightly better results across all time frames. (When dates fall on a weekend, days are moved back or forward to the next tradable day). For the one-day strategy, the average results are slightly better at $0.65 than the results for the post Prime period at -$1.53. For the one-week strategy, the results are also slightly better than the post Prime period at -$6.26 as opposed to -$10.81. The most impressive results are for the pre-Prime period of holding for one month at gains of $35.81 as opposed to the losses in the post-Prime period of -$8.27.

Prime’s Impact on Amazon

Amazon is a juggernaut. Even though Prime Day sales of $12 billion in 2022 seem impressive. It is worth noting that the total revenue for this company in 2021 was $469,822,000. $12 billion is less than 3% of its total revenue. From this perspective it makes sense that the impact of Prime Day sales on the company’s share price would be insignificant at best.

The Bottom Line

It is useful to remember that the stock market acts as a forward-looking discounting mechanism. This means that the market will usually incorporate all publicly available information into the price of the stock. By the time the news is out about a particular event that had been anticipated by the market, it is usually too late to profit from it. Shocks to the market and individual stock prices usually happen when information that had not been expected occurs.

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