Prime Day Impacts Amazon’s Stock
Amazon (AMZN) likes to encourage its customers to buy. When the company does it successfully, investors are encouraged to invest. When Amazon Prime launched as a subscription service, it became so popular that Amazon Prime’s subscriber base grew rapidly for years. Naturally, Amazon decided to find a way to reward that large and loyal subscriber base and encourage subscribers to buy even more. In July 2015, Amazon launched its first Prime Day, and it was a huge success.
The price pattern in recent years suggests that the results of Prime Day have shown influence on the stock price; it is possible that the results will be better than average compared to other days.
If a trader buys shares on Prime Day and holds it for two weeks or a whole month, the average returns are significantly better than other periods of the same duration.
The company reported a 60% revenue increase compared to the same 36-hour period the previous year, and sales have climbed to a new record with each annual iteration. So perhaps it’s no wonder that today, Prime Day is important not only for customers, but also for investors and traders.
Consider the chart below documenting the rise in Amazon’s stock price, revenue, and earnings. Over the past decade, AMZN’s shares rose 225% in the first half of the decade leading up to the company’s first Prime Day. Since then, the shares have risen more than 650%.
There is certainly more at stake behind the rise in AMZN’s share price than the Prime Day result alone. Online consumer portals have become essential for life in modern society and Amazon.com he is perhaps the most influential of them all. Therefore, while it is no wonder that the first investors in this company have been rewarded over the years, many traders are surely curious as to whether there are still opportunities to benefit from the effects of Prime Day.
The number of Prime Day events (five so far, with the sixth imminent), constitutes too small a sample size to say anything definitive, yet the anecdotal evidence of these days is intriguing. Thoughtful investors and analysts have recognized the importance of examining Prime Day’s results.
The price pattern over the past few years suggests that Prime Day’s results have shown influence on the stock price, enough that if you bought AMZN shares at the closing price of the first trading day after each Prime Day began, and held for a short duration, you may find that the results of the first day of trading have been
Consider the following data shown in the table below. This chart examines three sets of data and averages returns for one day, 10 days (two weeks), and 20 days (one month). These returns are represented by both the total range (vertical line) and the average 50% (shaded box) of the data returned. These yields are calculated from the closing price on the entry day to the closing price 1, 10 and 20 trading sessions later.
The first collection of bars (blue, orange and Gray) on the left represents the average AMZN yields for all trading days prior to October 2020. The past Prime Days have occurred in mid-June, and it turns out that these events usually occur in the month before second-quarter earnings are released. This year, Prime Day was delayed until October to help the mass distribution of goods created by this event go more smoothly during pandemic conditions. Therefore, it seems appropriate to compare one-day returns for the middle of the month before Amazon reported any quarterly earnings since 2015 (when Prime Day began). These similar quarterly days represent the second collection of bars. The third set of bars on the chart includes the entire range of returns in the data for the Five Prime Day events combined.
The average daily yield for all registered AMZN trading days is about 0.19%. The average half of these yields extends through a range of 3.7%, which tilts slightly positive. The average yield for two weeks is 1.96% with an average variation of 8% extending more significantly upwards. The average one-month yield is 3.95% and, with the average of the data varying around 6%, it also shows a positive bias.
One day returns
The purchase of AMZN shares at the close of the first day after Prime Day begins, and the sale at the close of the next day, produces an average yield of 0.27%. This is slightly higher than an average day for AMZN.
Similar quarterly days data only returns 0.02%, so trading in the month Prime Days occur seems to be significantly better in comparison.
Returns of two weeks and one month
Things start to get interesting if a trader buys shares on Prime Day and keeps it for two weeks or for a whole month. The 10-day trading period after Prime Day returns an average of 4%, more than double the average return for any given 10-day trading period. Data for a similar day quarter returns 1.85%, which looks more like the average return for that duration.
Data for the 20-day trading period (about a month) show equally impressive results. The average return for a 20-day period after Prime Day is 6.62%, compared to 3.95% for any given 20-day period and 3.89% for similar quarter returns.