Amazon (NASDAQ:AMZN) closed down last Thursday slipping 0.83% on the day. But for a short time that morning, Amazon stock continued its July rally and passed the $2035 mark.
That milestone put it in the rarified company of Microsoft (NASDAQ:MSFT) as a trillion dollar company — a position Amazon has not been in since last September.
Here’s why AMZN stock has been on the rise this month, and why there could be clouds on the horizon.
Anticipation Over Prime Day is Boosting Amazon Stock
Prime Day is on July 15 and 16 this year. So that’s two days, but like JD.com (NASDAQ:JD) and its yearly 6.18 anniversary sale (which actually runs for several weeks) AMZN isn’t known for being a stickler on nomenclature.
However, one thing is certain and investors know it: Prime Day is huge for Amazon. It’s the company’s largest shopping event, surpassing Cyber Monday and Black Friday.
The company suffered a black eye last year when its website repeatedly glitched for several hours, but despite technical issues, the sale was a huge success. AMZN reported selling more than 100 million products worldwide during the Prime Day event. Sales were up 89% over the previous year in the first 12 hours — despite issues with its website during that time.
Amazon doesn’t release dollar figures, but it was estimated that last year’s Prime Day brought in $4.19 billion in worldwide sales. That’s a huge number, and up 60% over the $2.41 billion from the previous year’s event. To put it all in perspective, the first Prime Day (in 2015) brought in an estimated $900 million in sales.
With those kind of numbers, you can see why Amazon stock had been on a run in July, gaining nearly 5% since the start of the month, before slipping on Thursday.
Also Helping AMZN? The Trade War’s Limited Impact
AMZN stock — like many other tech stocks — had also been impacted by concerns over the trade war between the U.S. and China. The threat of increased tariffs on Chinese good sold in the U.S., and the potential for retaliatory measures was bad news for Amazon. A trade war could impact the economy globally, and cut consumer spending. In addition, tariffs make products more expensive which means consumers may buy less. Both scenarios are tough on retailers, and despite its size AMZN is not immune.
Fear that the situation was escalating hit AMZN stock hard in May, but as rhetoric cooled and consumers kept buying, Amazon stock recovered. Its latest rally took it to a new high for 2019 and Amazon’s market cap briefly hit the $1 trillion mark.
Storm Clouds on the Horizon for Amazon Stock
This week is critical for Amazon, with Prime Day falling on the 15th and 16th. However, there’s another big event involving AMZN that may be a little less pleasant for the company and its investors. On July 16, Amazon and other FAANG tech companies will be appearing before the House Antitrust Subcommittee. In AMZN’s case, the company’s grip on e-commerce will be under particular scrutiny.
Should investors worry that the government’s interest in the company could result in measures that torpedo Amazon stock? Analysts at Wedbush believe the investigations won’t result in actual intervention any time soon, and the long-term impact on Amazon and AMZN stock may be less than feared.
“These hearings and potential DOJ probes can represent an overhang and risk to the FAANG group, but we would encourage investors to focus on the fundamentals in the near-term as any probe would take years to complete as we witnessed firsthand with Microsoft, which proved to be more noise than a structural jolt to its business model.”
In other words, stay calm and enjoy what is expected to be another record-setting Prime Day.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
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