Stock Market Outlook: Why Amazon Prime Day Means More Than Just Deals

InvestorPlace

Jul. 9, 2024, 04:10 AM

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

No sales day is as big, or as important, as Amazon’s (NASDAQ:AMZN) Prime Day, which runs on July 16-17 this year. The online store generated $12.9 billion during last year’s event, accounting for 2% of its annual revenue. It’s one thing that makes Amazon stock extra reliable.

Prime Day and Amazon Stock

As history makes clear, Amazon is not the first to throw this kind of party. Alibaba Group Holding (NASDAQ:BABA) had its first “Singles Day” in 2009. It created a fake holiday where unmarried Chinese men and women could indulge themselves.

But Prime Day offers Amazon several unique advantages. It acts as an off-season test of infrastructure and delivery networks, far from the Christmas rush. It is also an ad for Prime itself, which with 230 million members now bringing it over $32 billion dollars, nearly all of it profit.

Prime Day also tells us a lot about the health of the consumer market. American consumers represent half of the event’s sales.

Small wonder the market hit a low around October 2022, when Amazon held a second “Prime Day.” This is now “Big Deal Day,” an Amazon clearance that kicks off its holiday shopping season.

If there’s a recession ahead, you may find it here, on a tracker retail researcher Numerator has developed to give industry insights on the day. It also can give you a look into the potential upsides or downsides for Amazon stock.

Prime Day Matters to Everyone

Amazon is already priming the pump with early deals on things like coffee machines from Keurig Dr Pepper (NYSE:KDP), the Apple (NASDAQ:AAPL) pencil, and specialty items like a cat water fountain.

Electronics feature heavily. There’s a lot of back to school merchandise, and “Lightning Deals” every hour for the compulsive. There’s an Amazon Live channel with demonstrations of the latest products. Amazon has also copied all the features of older sales events, like coupons.

As with St. Patrick’s Day, Amazon Prime Day has become its own season. Competitors like Target (NYSE:TGT) and Walmart (NYSE:WMT) now time their summer sales to compete with Prime Day. This has proven to be a winning strategy for many.

China’s Pinduoduo (NASDAQ:PDD) is also getting into it with its Temu store. This is something Amazon now wants to compete with by shipping goods directly from Chinese manufacturers.

The Bottom Line

I have written before, as recently as last week, that Amazon stock is one you hold, not one you trade. The fact that founder Jeff Bezos is partly cashing out to fund his new champagne retirement does not change my view.

Amazon stock closed on July 5 at exactly $200 per share, its market cap $2.2 trillion. It was the best performer in the Dow average over the last six months.

You may recall it replaced Walgreens Boots Alliance (NYSE:WBA) here in February, to the delight of Wall Street bulls.

But there’s another lesson you can take from Prime Day that applies to the whole market.

Consumers drive the economy. If they start to get the sniffles when Prime Day rolls around, you might want to batten down the hatches on all your stock holdings.

As of this writing, Dana Blankenhorn had a LONG position in AAPL and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.