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Should You Buy Amazon (AMZN) Stock On Prime Day?

Benjamin Rains
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Should You Buy Amazon (AMZN) Stock On Prime Day?

Shares of Amazon (AMZN) opened higher Monday, touching another new all-time high directly before the start of its annual Prime Day. Aside from the hype and gimmicks surrounding its widely popular shopping holiday, Prime Day is important because although AWS has expanded, Jeff Bezos' firm is still a retail business at its core.

Shares of Amazon AMZN opened higher Monday, touching another new all-time high directly before the start of its annual Prime Day. Aside from the hype and gimmicks surrounding its widely popular shopping holiday, Prime Day is important because although AWS has expanded, Jeff Bezos’ firm is still a retail business at its core.

Retail

Amazon Prime Day kicks off Monday afternoon and runs for 36 hours, with “more than one million deals” available to shoppers around the world, according to the company. This list includes everything from clothing to big-ticket items such as TVs and Amazon-branded electronics.

Amazon’s revenues surged 43% to touch $51 billion last quarter, with online store sales accounting for $26.94 billion or roughly 52% of total Q1 revenue. Meanwhile, physical store sales hit $4.26 billion and third-party seller services reached $9.27 billion. Therefore, Amazon’s overall e-commerce and retail business accounted for nearly 80% of Q1 revenue and remains vitally important going forward.

The company’s growth has forced the likes of Target TGT, Walmart WMT, Costco COST, and nearly every other retailer to revamp their business models, bolster their e-commerce platforms, and implement delivery. Amazon also recently made a big push into the pharmacy business with its PillPack purchase.

On top of Amazon’s online sales business, its cloud hosting services compete directly against Microsoft MSFT, Google GOOGL, and IBM IBM. Furthermore, the Seattle-based tech giant’s Prime Video is one of Netflix’s NFLX biggest rivals. And Amazon’s streaming music business hopes to take on Spotify SPOT and Apple AAPL Music. This expansion into new areas, coupled with its continued e-commerce growth has helped its stock price soar.

Price Performance & Valuation

Shares of Amazon have climbed nearly 280% during the last three years, which crushes the S&P 500’s 31% climb. More recently, Amazon's stock price is up 41% over the last six months and 21% during the last three months.

Amazon’s fantastic performance has not helped the company offer solid value to this point. But investors should note that Amazon does not care much about earnings or its bottom line, while it actively expands at a rapid speed.

Looking Ahead

Amazon is set to report its second-quarter financial results Thursday, July 26. So let’s take a look at what investors should expect from the company next week.

Our current Zacks Consensus Estimates are calling for Amazon’s Q2 revenues to surge by nearly 41% to hit $53.46 billion. At the other end of the income statement, the company is projected to see its adjusted Q2 earnings skyrocket by 522% from $0.40 per share in the year-ago period to $2.49 per share.

Bottom Line

Investors should note that during the last 60 days, Amazon has earned two earnings estimate revisions for the second quarter, with 100% agreement to the downside, along with this same revision ratio for its current full year. Meanwhile, Amazon’s quarterly earnings estimate has fallen by one cent over this period.

However, AMZN’s Most Accurate Estimate—the representation of the most recent analyst sentiment—called for earnings of $2.67 per share. This comes in 18 cents above our current consensus estimate and means some analysts might be expecting more from Amazon’s bottom line as we get closer to the company’s report date. Amazon is currently a Zacks Rank #3 (Hold) and might be worth considering even as it sits at a new all-time high.