Amazon's [AMZN] share price could be in for a bounce as Prime Day kicks off this week. Having moved the event from July to October, Amazon has effectively extended its peak holiday season, with analysts expecting the online retailer to be in for almost $10bn in revenue — the biggest ever haul for the event.
We look at how Prime Day could add to the online retail giant’s bottom-line and what it means for Amazon’s share price.
When is Amazon Prime Day?
13 to 14 October
What are analysts expecting?
Amazon Prime Day could see $9.91bn in revenue, according to eMarketer — a whopping 43% increase on the $6.93bn from last year’s event. In the US, Amazon is looking at $6.17bn in sales, with $3.74bn from the rest of the world. JP Morgan anticipate a slightly more conservative $7.5bn in Prime Day revenue, although that would still represent a big leap from 2019’s sales.
Will Prime Day move Amazon's share price?
Expectations of almost $10bn in sales are a far cry from Amazon Prime Day’s premier in 2015, which netted $0.9bn. According to a RetailMeNot survey, this year’s event is expected to be the biggest shopping day in the fourth quarter, with 67% of those polled expecting to make a purchase during the event. Hitting these numbers will likely see Amazon’s share price rise.
Amazon's expected sales for Prime Day 2020
Amazon’s decision to move Prime Day from July, where it was designed to prop up sluggish summer sales, to October has certainly caught investors’ attention. This sets in motion a run of big shopping events over the holiday season, with Black Friday on 27 November, followed by Cyber Monday and the run-up to Christmas.
“The biggest difference this year is that Prime Day is running ~3 months later than its typical mid-July timing, & as such AMZN is promoting the event as an early start to holiday shopping vs. Prime Day’s typical focus on summer & back-to-school shopping,” JP Morgan said in an investor note.
Prime Day 2020 could see Amazon’s share price continue to rise if recent results are anything to go by. Last quarter, the online retail giant notched up $88.9bn in net sales, up 40% from $63.4bn in the same quarter last year. Diluted earnings per share came in at $10.30, more than double the previous year’s $5.22.
JP Morgan thinks holiday bargain hunters will “further accelerate” the trend for online shopping as Amazon heads into its “busiest quarter”.
“Importantly, we believe Amazon stands to benefit from an earlier start to holiday shopping, with Prime Day representing ‘good’ pull-forward that helps smooth demand through 4Q,” JP Morgan said.
"Importantly, we believe Amazon stands to benefit from an earlier start to holiday shopping, with Prime Day representing ‘good’ pull-forward that helps smooth demand through 4Q" - JP Morgan in an investor note
Where next for Amazon’s share price?
The added buzz around Amazon Prime Day this year isn't without its problems, though. To cope with the extra demand Amazon has had to grow its global warehouse network square footage by 50% in 2020. CNBC also reports that third-party sellers — who account for 58% of sales — feel underprepared. With expectations so high, any problems over this extended holiday season could hurt Amazon's share price performance.
Still, Wall Street is forecasting another strong quarter for Amazon. Expectations are that earnings will come in at $8.81 a share, well ahead of the $6.47 seen in the same quarter last year. Revenue is pegged at $111.3bn, a 27.30% increase on last year's $87.44bn.
With Amazon's share price down almost 7% since 2 September, now could be the time to pick up the stock at a discount. Among the analysts tracking the stock on Yahoo Finance, the average price target is $3,720.09, a 13.2% upside on Amazon's share price (as of 9 October’s close).
JP Morgan is even more optimistic, pinning a $4,050 target on Amazon’s share price. Hitting this would a 23.2% upside on the current share price.
|Operating Margin (TTM)||5.20%|
|Quarterly Revenue Growth||40.20%|
Amazon share price vitals, Yahoo Finance, 13 October 2020