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

In each of the years since Prime Day's inception, gross merchandise sales have increased, growing from $0.9 billion in 2015 to $12.09 billion in 2022. But as a $1.3 trillion 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.

A close look at Amazon's (AMZN) daily price chart since the beginning of the century shows the company has been in an impressive uptrend since 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.

That's not to say there's no impact. The first Prime Day lasted for 24 hours and included nine countries. Amazon 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 Amazon extending the sale in 2017 to 30 hours.

In 2018, Amazon added more markets and extended the sale to 36 hours. By 2019, Amazon had expanded the sale to include more countries and two full days. In its 2021 letter to shareholders, Amazon reported that it had 200 million Prime members worldwide.

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%. 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.

Amazon's History

Amazon is one of the most valuable companies in the world, with a market capitalization exceeding $1.3 trillion. The company continued to grow 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 the company to add another perk to reward its members. Prime Day was created in July 2015 to celebrate 20 years of being in business.

AMZN's Performance Before and After Prime Day Began

There have only been seven Prime Day sales events, constituting too small a number to reach any statistically significant conclusions. But nevertheless, it is interesting 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 Prime Day sales and hold for a period ranging from one day, five 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 one day, five 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.