Amazon CEO Andy Jassy — who took over from Jeff Bezos on July 5, 2021 — has earned a gentleman’s C for his performance so far.
Amazon’s revenue growth rate has slowed and its stock price has fallen over the last two years. Nevertheless, the online shopping giant’s stock has beaten the S&P 500 so far in 2023 — up 51% — and cost cuts have boosted its profits.
Can Amazon’s Prime Day 2023 — a buzzy buying binge aimed at getting people to buy online by giving discounts to Amazon Prime members — revive the growth of a groundbreaking company whose boffo founder retired two years ago?
In a word: No. Amazon’s Prime Day — a fast-fading revenue sugar high — has historically sent Amazon’s stock ticking down, according to Investopedia. I have contacted Amazon for comment and will update this post if I receive a response.
Until Jassy can spearhead a significant source of new growth for Amazon, investors should look elsewhere.
When Is Amazon Prime Day 2023?
Amazon Prime Day — a holiday the company invented in 2015 to “increase sales during the slower summer months and to boost Prime memberships” — is happening July 11 and is forecast to generate about $12.9 billion in revenue this year, according to the Wall Street Journal.
That figure represents a growth slowdown. Insider Intelligence estimates 2023’s Amazon Prime Day to be 11% more than last year — way down from the roughly 60% growth it spurred in its early years — but a slight improvement over Amazon Prime Day’s sub-10% growth in 2020 and 2021.
Amazon has cut back on its investment from previous years and focuses more on discounts for its own products. Nevertheless, worldwide purchases have grown at a 36.5% average annual rate between 2015 and 2022 — when people bought 300 million items, according to Fast Company.
Amazon Prime Day is forecast to boost Amazon Prime subscriptions. JPMorgan analyst Doug Anmuth estimates Amazon Prime memberships will approach 300 million members by the end of the year — about 100 more than the company had in 2021.
Moreover, analysts will be looking for a revival in demand for computer and consumer-electronics which have fallen since peaking during the Covid-19 pandemic highs, noted the Journal.
What’s Special About Amazon Prime Day 2023?
This year, Amazon plans to minimize shopper confusion by personalizing the buying experience through machine learning and other tools. Carmen Nestares Pleguezuelo, head of Amazon’s U.S. Prime memberships, said, “The breadth of this event has gotten tremendously big. Your Prime Day and my Prime Day are different. We’re going to tailor Prime Day exclusively for [the customer],” Fast Company reported.
Here are highlights of how Amazon will personalize the shopping experience:
- Personalized deal campaigns. Nestares Pleguezuelo said Amazon has created more than 40 personalized Prime Day deal campaigns such as “recommended deals for you” or “inspired by your recent history.”
- Deals on wish list and items consumers bought before.
- Customization to each consumer. Amazon will use AI and deep learning to customize the shopper experience based on their shipping and browser histories and wish lists.
Jassy’s Gentleman’s C
Jassy has been more of a tweaker of the company he inherited rather than an innovator who made large investments that created large, new sources of revenue growth.
He has spent the last two years presiding over slowing growth and — until 2023 — a declining stock price. Between 2011 and 2021, Amazon revenues grew at a nearly 27% average annual rate while its stock rose at a 40% average annual rate.
Between 2021 and 2022, Amazon revenue increased a mere 9.4% — about the same rate it grew in the year ending March 2023. During Jassy’s two-year reign over Amazon, its stock price has fallen at a 14.8% average annual rate. To be fair, in 2023, Amazon stock rose far more quickly than the NASDAQ’s
NDAQ
How Does Prime Day Affect Amazon’s Stock?
Prime Day is not likely to boost Amazon’s stock. What would help Jassy do better than a C is accelerating Amazon’s revenue growth — which would require the company to invent some new business to sprint past its moribund online retailing unit and its slowing AWS business.
There is no good reason to make an investment decision on Amazon stock based on Prime Day. In the eight years since Prime Day began, Amazon’s stock has fallen an average -0.34% on that day. “Of the eight Prime Days so far, just three (2017, 2018, and 2021) have yielded positive returns for Amazon shares, while five (2015, 2016, 2019, 2020, and 2022) have yielded negative returns,” Investopedia wrote.
Amazon Stock Price History on Prime Day
Investopedia provided the details below of Amazon’s stock performance on the previous eight Prime Days.
Prime Day 2022
- Market open: $111.75
- Market close: $110.40
- Change: -1.21%
Prime Day 2021
- Close 6/18: $174.35
- Close 6/22: $175.27
- % Change: 0.53%
Prime Day 2020
- Close 10/12: $172.15
- Close 10/14: $168.19
- % Change: -2.30%
Prime Day 2019
- Close 7/12: $100.55
- Close 7/16: $100.50
- % Change: -0.05%
Prime Day 2018
- Close 7/16: $91.12
- Close 7/18: $92.15
- % Change: 1.13%
Prime Day 2017
- Close 7/10: $49.82
- Close 7/12: $50.33
- % Change: 1.02%
Prime Day 2016
- Close 7/11: $37.69
- Close 7/12: $37.41
- % Change: -0.74%
Prime Day 2015
- Close 7/14: $23.28
- Close 7/15: $23.06
- % Change: -0.95%
A recent survey found shoppers intend to spend less in 2023 summer sales than in previous years. Their average $250 budget for this year is down 36% and 58% compared to what they spent in 2021 and 2020, respectively, according to Investopedia.
Those considering an investment in Amazon stock should ask whether the online retailer can resume the 27% average revenue growth rate it enjoyed under Bezos.
For the moment, Amazon seems to be saddled with relatively slow-growing businesses which show no sign of accelerating. As the Journal reported, its $450 billion a year retail business has grown “in low single-digit territory for most of the last two years since enjoying a strong early-pandemic bounce.”
Meanwhile, Amazon’s oft-touted AWS unit — a big contributor to its operating profit — is suffering from relatively slow growth. AWS grew a “record low of 16%” in the first quarter and Amazon expects that to drop even lower in the second quarter.
Will generative AI boost demand for AWS? Jassy is likely to announce in a November “re:Invent” conference a raft of AI related announcements — the likes of which sent Google
GOOG
Unless he comes up with a new invention that creates a fast-growing future, perhaps Jassy can keep Amazon stock rising by exceeding low expectations. For now, TipRanks reports 38 Wall Street analysts offering 12-month price targets for Amazon see the stock rising 11.2% over the next year.
Read the full article here
