Amazon (NASDAQ: AMZN)'s Prime Day(s) are an iconic event for e-commerce. Rival companies typically have sales events going on at that time (this year it was July 11-12) in an effort to try to divert consumers away from shopping on Amazon because they know how big of a sales event it will be.
Last year, the company had a second Prime Day event in October. And this year, it repeated the pattern. Should investors expect this to be a regular occurrence for the business, and is it a good move, or will it just end up shifting sales from Black Friday?
Amazon posts record numbers for fall event
Earlier this month, Amazon had a two-day event it calls its Big Deal Days, which was, effectively, a repeat of Prime Day(s) packed with deals and special promotions for its customers. Here were some of the highlights from the latest event, according to data from market research company Numerator:
- 72% of people who shopped at the October event also shopped at July's Prime Day event.
- 88% of people who shopped were Amazon Prime members.
- Two of the top three items purchased were Amazon-branded products, including its batteries and Fire TV stick.
- The average order size of $53.47 was down slightly from $58.67 for Prime Day in July.
Overall, it was the company's best fall sales event thus far. Amazon initially launched the second Prime Day(s) event last year amid concerns about slowing revenue growth.
NASDAQ: AMZN
Key Data Points
Why this could become a regular occurrence for Amazon
The event's success suggests it isn't just a regular shopping day; consumers are circling it on their calendars, and it is making an impact. It allows consumers to start shopping for the holiday season even earlier than Black Friday. And Numerator's data says 45% of people who made purchases bought things they were waiting to buy until they went on sale.
Knowing there is a sales event around the corner incentivizes customers to wait until then. Doing so may lead to other purchases, not unlike when someone goes into a physical retail store and ends up buying more than they planned.
There is certainly the potential that having another sales event could lead to more underwhelming sales later. However, there were no signs of that for Black Friday last year. In November 2022, Amazon said it had its "biggest holiday shopping weekend ever," which included the five-day period (also known as the Turkey 5) from Thanksgiving to Cyber Monday. And a month earlier, the company had its October Prime Day event.
Given the success of another sales event in the fall, it appears likely that Amazon will continue this trend. Not only does it help showcase its own products, but it also gives consumers a reason to circle their calendars and incentivizes them to spend on that day, knowing there will be products marked down more than on other days.
Amazon's business remains in excellent shape
Last year, Amazon reported revenue of $514 billion, rising by 9% from 2021 when revenue came in at just under $470 billion. While the e-commerce giant didn't end up posting a profit last year due to rising costs, it has been focusing on cutting costs and has gotten back to reporting regular, consistent profits.
During the first two quarters of this year, Amazon's bottom line totaled just under $10 billion -- nearly as much as the $11.6 billion it reported in all of 2019.
Overall, the business is doing well, and another sales event in the fall looks like it should be the norm moving forward. It wouldn't be surprising if the company were to have more sales events, particularly earlier in the year.
Is Amazon stock a buy?
Year to date, Amazon's stock has risen 51% as tech stocks have been rising in popularity, bouncing back from a tough year in 2022. Last year, shares of Amazon fell by 50% as investors grew concerned about inflation and economic conditions.
Trading at 38 times its estimated future earnings, the stock trades at a premium as the S&P 500 average multiple is only 19. But given its strong brand, the improvement in earnings, and more potential future growth (as economic conditions improve), this stock could be an excellent buy for the long haul.
According to the consensus analyst price target of $165, the stock has an upside of at least 30% over the next 12 to 18 months. For long-term investors, Amazon remains a great investment to buy and hold.
