As the countdown to Amazon.com’s (AMZN) highly anticipated Prime Day begins, the retail giant is preparing to captivate consumers with irresistible deals and discounts. Yet, amid the excitement, investors face a compelling question: Is now the time to invest in AMZN ahead of Prime Day? Keep reading…

E-commerce giant Amazon.com, Inc. (AMZN) is gearing up for its biggest two-day shopping event, Prime Day, which will take place in July 2024. What started as a one-day celebration of Amazon's 20th anniversary has transformed into a massive 48-hour nonstop sales event eagerly anticipated by over 200 million Prime members worldwide.

Amazon Prime Day isn't just a shopping event; it's a strategic opportunity for sellers to boost their Amazon product sales. With extensive promotion to Prime members, the event drives a surge of traffic to its e-commerce platform, offering unbeatable deals across a wide range of products.

Last year alone, Prime members purchased more than 375 million items globally and saved over $2.5 billion on millions of deals across AMZN's platform, marking it as the most successful Prime Day to date. Moreover, brands that strategically advertised in the lead-up to and during the event saw a remarkable 216% increase in awareness and a 214% increase in consideration compared to the preceding week.

According to Statista, in 2023, Amazon Prime Day sales soared to $12.7 billion in the United States alone. AMZN also hit a milestone by delivering to Prime members at record speeds. Last year, the company expedited more than 7 billion units, ensuring same-day or next-day delivery for Prime members, including over 4 billion in the United States.

As the company prepares for Prime Day 2024, these achievements underscore the event's substantial impact on e-commerce trends and consumer behavior. Shares of AMZN have surged 37.6% over the past nine months and 47.9% over the past year to close its last trading session at $186.10.

Let’s look at factors that could influence AMZN’s performance in the upcoming months.

Robust Financials

In the first quarter that ended March 31, 2024, AMZN’s net sales increased 12.5% year-over-year to $143.31 billion. Sales in its North American segment rose 12% from the year-ago value to $86.34 billion, while international segment sales increased 10% year-over-year to $31.94 billion. Amazon Web Services (AWS) continued to be a strong performer, with sales of $25.04 billion, up 17.2% year-over-year.

Its operating income improved by 220.6% from the year-ago value to $15.31 billion. The company’s net income of $10.43 billion or $0.98 per share indicates robust growths of 228.8% and 216.1% from the prior year’s period, respectively.

AMZN’s trailing-12-month operating cash flow surged by 82% year-over-year to $99.15 billion, up from $54.3 billion in the same period ending March 31, 2023. Its free cash flow also saw a significant turnaround in the same period, with an inflow of $50.15 billion, compared to an outflow of $3.32 billion in the prior year’s period.

As of March 31, 2024, AMZN's cash and cash equivalents amounted to $72.85 billion, compared to $73.39 billion as of December 31, 2023.

Solid Historical Growth

AMZN’s revenue and EBITDA have grown at respective CAGRs of 12.1% and 20.5% over the past three years. The company’s EBIT has increased 19.5% over the same timeframe, while its net income and EPS have improved at CAGRs of 11.9% and 10.7%, respectively.

Also, the company’s tangible book value and total assets have grown at CAGRs of 30.1% and 23.9%, respectively, over the past three years.

Favorable Analyst Estimates

The consensus revenue estimate of $148.61 billion for the fiscal second quarter (ending June 2024) represents a 10.6% increase year-over-year. The consensus EPS estimate of $1.01 for the current quarter indicates a 56.1% improvement year-over-year. The company has an excellent surprise history, surpassing the consensus revenue estimates in each of the trailing four quarters.

Additionally, AMZN’s revenue and EPS for the current year (ending December 2024) are expected to grow 11.1% and 56.5% year-over-year to $638.66 billion and $4.54, respectively.

Robust Profitability

AMZN’s 47.59% trailing-12-month gross profit margin is 29% higher than the industry average of 36.90%. Its trailing-12-month EBITDA and net income margins of 16.35% and 6.38% exceed the industry averages by 46.1% and 32.3%, respectively. Similarly, its trailing-12-month 9.69% levered FCF margin is 75.7% higher than the industry average of 5.52%.

Furthermore, the stock’s trailing-12-month ROCE and ROTA of 20.30% and 7.10% favorably compare to the respective industry averages of 11.63% and 4.24%.

POWR Ratings Reflect Promise

AMZN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. AMZN's B grade for Momentum is justified by its share price trading above its 50-day moving average of $182.95 and 200-day moving average of $160.06.

The stock also has a B grade for Sentiment and Quality, which syncs with its optimistic analyst estimates and higher-than-industry profitability.

Within the B-rated Internet industry, AMZN is ranked #7 out of 51 stocks.

Beyond what I have stated above, we have also given AMZN grades for Growth, Value, and Stability. Get all AMZN ratings here.

Bottom Line

For investors eyeing Amazon's stock, Prime Day represents more than just a sales event; it serves as a critical barometer of the company's ability to capture consumer spending and enhance brand loyalty. With its proven track record of attracting millions of shoppers and generating substantial sales, Prime Day could significantly influence Amazon's revenue growth trajectory, mirroring past successes.

According to Consumer Intelligence Research Partners, AMZN’s Prime subscription service reached a record high of 180 million U.S. shoppers in March, marking an 8% increase from the previous year. Recent data reveals that three out of every four Americans now hold Prime memberships, which is a clear indication that Amazon is still gaining new subscribers.

Moreover, the event’s success could catalyze AMZN's stock performance, as evidenced by its impressive year-to-date returns of over 22%. The company's strategic initiatives, including investments in logistics and fulfillment, further bolster its capacity to capitalize on heightened consumer demand during Prime Day and beyond.

Given the company’s top-line trends, accelerating profitability, and promising growth outlook, investing in its stock ahead of Prime Day could be a strategic opportunity for growth-oriented investors.

How Does Amazon.com, Inc. (AMZN) Stack Up Against Its Peers?

While AMZN has an overall POWR Rating of B, investors could also check out these other stocks within the B-rated Internet industry with A (Strong Buy) ratings: Yelp Inc. (YELP), Dingdong (Cayman) Limited (DDL), and Travelzoo (TZOO). For exploring more A and B-rated Internet stocks, click here.

What To Do Next?

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AMZN shares were trading at $186.55 per share on Friday afternoon, up $0.45 (+0.24%). Year-to-date, AMZN has gained 22.78%, versus a 14.80% rise in the benchmark S&P 500 index during the same period.

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About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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