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Asset Watch

Has Amazon’s prime performance already passed?

 

Thursday, July 13, 2023

For Amazon enthusiasts, it’s the most wonderful time of the year. With annual Prime Day celebrations (held from Jul. 11-12) dominating the headlines, JPMorgan analyst Doug Anmuth expects the 2023 event to generate 12% year-over-year (YoY) revenue growth.
He wrote: “Amazon should be well-equipped for the elevated demand of Prime Day, & the event should also help AMZN right-size inventory ahead of heavier demand deeper into 2H around the holidays.” Anmuth even has a $145 price target on the “best idea” stock.
However, with spotty performance realised following historical Prime Days, is the good news mostly priced in?

The vertical grey lines below mark the beginning of the last five Prime Day events, and the milestones typically occur in July. In October 2020, the event was moved due to the pandemic, and was set in June 2021 to avoid competing with the Olympics.

Yet, the price action shows that the stock typically rallies before the festivities and suffers mild-to-meaningful drawdowns thereafter. In 2018, Amazon continued its post-Prime-Day rally for nearly three months before declining sharply, and the bullish momentum also continued for roughly a month in 2021 and 2022. But the event largely marked the tops in 2019 and 2020.

As Amazon is already experiencing a substantial rally off its January 2023 low, further momentum may depend on management’s guidance when they report earnings in late July.

So, will Amazon repeat its historical disappointment, or are its best days still ahead?


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