Amazon (AMZN) likes to encourage its customers to shop. When the company successfully does so, investors feel encouraged to invest. When Amazon Prime was launched as a subscription service, it became so popular that the Amazon Prime subscriber base grew rapidly for years. Naturally, Amazon decided to find a way to both reward that large and loyal subscriber base and encourage subscribers to shop even more. In July of 2015, Amazon launched its first Prime Day, and it was wildly successful.
- Over the last decade, AMZN shares rose 225% in the first half of the decade leading up to the company's first Prime Day. Since then, shares are up over 650%.
- The price pattern in recent years suggests that Prime Day results have shown influence on the stock price—you might find the results to be better than average when compared to other days.
- If a trader buys stock on Prime Day and holds it for two weeks or a whole month, 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 window in the prior year, and sales have climbed to a new record high with each annual iteration. So perhaps it is no surprise that nowadays, Prime Day is important not only to customers, but to investors and traders as well.
Consider the following chart that documents Amazon's rise in share price, revenue, and earnings. Over the last decade, AMZN shares rose 225% in the first half of the decade leading up to the company's first Prime Day. Since then, shares are up over 650%.
AMZN's Performance Before and After Prime Day Began
Certainly, there is more at play behind the increase in the price of AMZN shares than the outcome of Prime Day alone. Online consumer portals have become essential to life in modern society and Amazon.com is perhaps the most influential of them all. So while its no wonder that early investors in this company have been handsomely rewarded over the years, many traders are surely curious to know if there are still opportunities to profit from the effects of Prime Day.
The number of Prime Day events (five so far, with the sixth one imminent), constitutes too small a sample size to say anything definitive, however the anecdotal evidence from these days is intriguing. Thoughtful investors and analysts have recognized the importance of scrutinizing Prime Day results.
The price pattern in recent years suggests that Prime Day results have shown influence on the stock price—enough so that if you were to buy AMZN shares on the closing price of the first trading day after each Prime Day started, and held for a brief duration, you might find the results to be better than average when compared to other days.
Consider the following data displayed in the chart below. This chart examines three sets of data and averages the one-day, 10-day (two weeks), and 20-day (one-month) returns. These returns are depicted by both the total range (vertical line) and the middle 50% (shaded box) of the return data. These returns are calculated from the closing price on the entry day to the closing price 1, 10, and 20 trading sessions later.
AMZN Prime Day Short-Term Returns
The first collection of bars (blue, orange, and gray) to the left represents the average of AMZN returns for all trading days leading up to October 2020. Past Prime Days have happened in the middle of June, and it turns out that these events typically occur in the month before second-quarter earnings are released. This year, Prime Day was delayed until October to help the massive 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 started). These similar-quarter days represent the second collection of bars. The third set of bars in the chart includes the entire range of returns in the data for all five Prime Day events combined.
The average daily return for all AMZN trading days on record is roughly 0.19%. The middle half of these returns spreads across a 3.7% range, which skews slightly positive. The average return for two weeks is 1.96% with an 8% middle variation that stretches more significantly to the upside. The average return for one month is 3.95% and, with the middle of the data varying about 6%, also shows a positive bias.
Buying AMZN shares on the close of the first day after Prime Day gets started, and selling on the close of the next day, produces an average return of 0.27%. This is slightly higher than an average day for AMZN.
The data from similar-quarter days returns only 0.02%, so trading in the month when Prime Days occur would appear to be significantly better by comparison.
Two-Week and One-Month Returns
Things start to get interesting if a trader buys stock on Prime Day and holds it for two weeks or for a whole month. The 10-trading-day period after Prime Day returns an average of 4%, more than double the average return for any given 10-trading-day period. The similar-quarter-day data returns 1.85%, which looks more like the average performance for that duration.
The 20-trading-day period (roughly one month) data shows similarly 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-day returns.
The Bottom Line
While only five data points are not statistically strong enough for this comparison to be conclusive, the anecdotal evidence suggests that Prime Day performance has driven a lot of interest from analysts and investors. This interest may in turn drive the attention of traders as well. These results seem to hint that this kind of attention drives unusually strong returns around this event.