Amazon (NASDAQ:AMZN) Stock Surges Amid Prime Day Event

Summary

• Stocks of Amazon Inc (NASDAQ:AMZN) jumped nearly five per cent on Monday ahead of its Prime Day event.
• Delayed from its usual slot in July, the two-day Prime Day sale is now set to run on October 13 and 14.
• Amazon workers in Germany have called a strike on Tuesday to coincide with the Prime Day event, demanding better pay and work conditions.

The anticipation circling the global Amazon Prime Day sale is high. Stocks of Amazon Inc (NASDAQ:AMZN) jumped nearly five per cent on Monday, October 12, closing at US$ 3442.93. The broader NASDAQ Composite, which opened at US$ 6709.67, closed at US$ 6850.19 to register a climb of 2.5 per cent. The NASDAQ tech index was also up two per cent.

The spike in tech stock-heavy NASDAQ index led to Wall Street ending on a high note on Monday. The S&P North American Technology Sector Index also registered a 2.3 per cent rise at closing on October 12.

Along with the rally in Amazon scrips, tech stocks of Apple Inc also jumped over six per cent during Monday trading in the light of its upcoming event on Tuesday, where it is expected to unveil its new 5G iPhones.

At the time of filing this write-up, Amazon Prime Day and Amazon Deals were the most searched terms/phrases on Google in the US and Canada.

HOW DOES AMAZON (NASDAQ: AMZN or AMZN: US) PERFORM AT ITS ANNUAL PRIME DAY EVENT?

The turn of events triggered by the coronavirus pandemic has landed the Amazon Prime day sale smack in the center of the holiday season. Delayed from its usual slot in July, the two-day Prime Day sale is now on October 13 and 14 – cushioned between the Canadian Thanksgiving and the upcoming holiday season.

A recent report by the International Council of Shopping Centers found that at least three out of four consumers plan to shop in advance this year (as against from a year ago) primarily due to health and safety. Plus, in these pandemic times, people are wary of crowding the stores for Boxing Day and Black Friday sales and gift shopping. These factors may give Amazon an edge during this year’s delayed Prime Day sales. However, this is subject to several macro and micro economic trends.

E-commerce platforms, Amazon Inc being the giant among them, have been relishing an increased demand amid the pandemic, thanks to the rise of the homebody economy.

For Prime Day this year, some financial analysts expect Amazon to make about US$ 10 billion in sales. Amazon does not reveal its revenue from the annual event. However, a Statista report claims that the company generated about US$ 7.16 billion from its 2019 Prime Day sales, beating its sales records of Cyber Monday and Black Friday put together.

AMAZON STOCK PERFOMANCE
CURRENT AMZN STOCK PRICE: US$ 3442.93

Amazon stock price has nearly doubled from its value of US$ 1731.92 a year ago, leading to growing calls for a stock split. It currently records a year-to-date growth of over 81 per cent.

When the markets tanked amid the coronavirus pandemic back in March, Amazon stocks fell to US$ 1676.61 (March 12), its lowest level this year. Since then, it has rebounded over 105 per cent in seven months’ time.

Amazon shares have climbed nearly 59 per cent in the last six months and nearly 11 per cent in three months. Its value dipped during the tech sell-off in early September but has recovered over 10 per cent in the last one month.

Amazon Stock YTD Performance; Source: Refintiv, Thomson Reuters

AMAZON FINANCIAL RESULTS

While most companies suffered financial crisis and resorted to laying off employees amid this pandemic this year, Amazon Inc hired more than 175,000 new associates.

The tech juggernaut saw a 42 per cent year-over-year (YoY) rise in its operating cash flow of US$ 51.2 billion in its second quarter ending 30 June 2020. Its free cash flow also climbed to US$ 31.9 billion in Q2 2020 from US$ 25 billion in Q2 2019.

Amazon Inc’s net sales were up 40 per cent YoY to US$ 88.9 billion in the second quarter of 2020. Its operating income increased to US$ 5.8 billion in Q2 2020 as against that of US$ 3.1 billion in Q2 2019. Its net income nearly doubled from Q2 2019 to US$ 5.2 billion in the latest quarter.

Amazon spent over US$ 4 billion on COVID-related costs in the second quarter of 2020 to ensure the required safety and health protocols were followed. The company also invested over US$ 9 billion in capital projects in Q2 2020.

Its third-party sales reportedly “grew faster” in the latest quarter than its first-party sales.

AMAZON WORKERS TO STRIKE ON PRIME DAY IN GERMANY

Despite all the positive news, all may not be hunky-dory at Amazon after all. Amazon workers in Germany have announced that they will be going on a strike on Tuesday, as the Prime Day event begins. A trade union in the country has asked employees at seven different Amazon warehouses in Germany to join in in the two-day strike demanding better pay and working conditions. The union there claimed that the COVID-related bonus promised to workers around March was scrapped in May.

As to how much of a dent this could inflect on Amazon’s performance during this year’s Prime Day sales is yet to seen. For most parts, the annual event has stirred much frenzy among people around the world.