Amazon Prime Day Is Fast Approaching – Here’s What It Means For Amazon Stock And Consumer Spending

Key takeaways

• Amazon
  AMZN
  has announced its flagship shopping event, Prime Day, will be taking place 11-12 July
• The last two years combined have generated around $20 billion of sales for the company
• The announcement wasn’t enough to stop Amazon stock from dipping as the FTC confirmed it was suing Amazon for misleading Prime subscription holders

Love it or hate it, Amazon Prime Day is a major online shopping event – and this year’s dates have just been announced. Investors are keen to see another successful Prime Day, with last year’s $12 billion in sales as the benchmark.

The two-day discount bonanza has become an interesting litmus test for American household spending habits, especially amid sticky inflation. But the announcement wasn’t enough to quell investor fears over the FTC suing the online shopping giant over allegedly trapping millions of Prime subscribers. Here’s the latest.

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When is Amazon Prime Day?

Amazon Prime Day is Amazon’s annual shopping event. It was first introduced in 2015 and is now akin to the infamous Black Friday rush we see after Thanksgiving. Amazon Prime Day will take place on the 11-12 July this year, so there’s plenty of time for shoppers to plan their new purchases ahead of time.

This year, Amazon has promised more deep discounts to top brands and its product lines. Shoppers can look forward to 60% off Amazon devices and up to 70% off their most beloved brands.

In a twist to the usual spending bonanza, the e-commerce titan will introduce exclusive deals for its Prime members. These invite-only offers will let Prime customers request invites to top-selling items ahead of non-Prime customers.

Amazon Prime Day deals will even appear on other retailer websites through the Buy with Prime program, where online shops can use Amazon’s payment and fulfillment services, getting even more eyeballs on the upcoming event.

Amazon first introduced the event in a bid to increase its Prime user base, with the exclusive deals this year taking that effort a step further. There are 200 million Prime members across 20 countries, with 153 million of those based in the U.S.

The litmus test for consumer spending

Amazon Prime Day was quickly copied by other top retailers like Target
TGT
, Walmart
WMT
and Best Buy
BBY
as they rushed to match the discounts. The shopping events have turned an otherwise slow season for retailers into a revenue-driving festival, which has become particularly popular as inflation bites household spending.

In 2022, online sales for Amazon Prime Day hit $12 billion across the two-day event, while the year before drew in $11.2 billion worth of sales. It’s obviously been a huge success for Amazon and the prediction is that many Americans will be on the site looking for deals this year, too.

Headline inflation is currently at 4% in the U.S. and down from the 9.1% peak last year. The sheer breadth of wares Amazon sells is a sure-fire predictor of success for the event. While cash-strapped U.S. households might not be in need of a discounted appliance, they require their everyday essentials, which Amazon Prime Day offers discounts on.

And those who have spending power will still be a factor. The U.S. Commerce Department reported a 0.3% rise in May retail and food services sales, with furniture, electronics, sporting goods and other categories all up. Paired with historically low levels of unemployment, there’s a potential double-whammy of cash-squeezed bargain hunters and wealthier households flocking to Amazon Prime Day.

What else is happening with Amazon?

Amazon’s dominance over online shopping has slowly marched the company to within touching distance of the top spot. JPMorgan analysts predicted the online shopping giant would overtake Walmart as the top U.S. retailer next year, citing Amazon’s 40% e-commerce market share as a key driver for the change in the retailer world order.

It’s also moved a tiny step towards its proposed $1.7 billion takeover of iRobot
IRBT
after the U.K. Competition and Markets Authority (CMA) said it had approved the deal after deeming it competitive enough to move forward. iRobot shares surged 18%, but Amazon’s declined 1.2% at the time.

But it hasn’t been sunshine and roses for Amazon this week – especially regarding Prime memberships. The Federal Trade Commission (FTC) is suing the company for allegedly duping and trapping millions of consumers into expensive Prime subscriptions without offering clear cancellation options.

FTC chairwoman, Lina Khan, said in a statement that “These manipulative tactics harm consumers and law-abiding businesses alike” and that the agency would continue to protect consumers from “unfair or deceptive practices in digital markets”.

Amazon’s stock performance this year

Even though Amazon Prime Day was announced, the stock price dipped slightly by 1% thanks to the negative headlines about the FTC bombshell. Amazon stock is currently trading at $124.83.

But investors are hopeful for the stock’s long-term potential. Thanks to the generative AI boom that swept the tech market, Amazon has gained 45% in its stock price this year. Amazon might not be the first name that comes to mind in the bruising AI race, but the tech’s potential to transform the business makes Amazon a sleeper stock for the AI revolution.

Jefferies analysts have recently upgraded Amazon’s share price target from $135 to $150, citing AI’s potential in Amazon’s cloud computing business.

The bottom line

Amazon Prime Day has become a key shopping event for global consumers – especially for those in the U.S. Investors will be looking to see that the success of previous years can be matched or hopefully surpassed as inflation continues to eat into household budgets.

Economists will also be keen to see the results of the two-day shopping extravaganza to see how American households are weathering ten rate increases from the Fed in a very short space of time. If we see a dip in Amazon Prime Day sales, it could be an interesting reflection that the Fed’s monetary policy is having the desired effect to tame inflation further.

Amazon has expanded past its shopping origins to become a full-on tech company, with generative AI leading its future. You can invest in the companies developing the cutting-edge tech of tomorrow with Q.ai’s Emerging Tech Kit, which uses an AI algorithm to predict where the top-performing tech stocks and ETFs might be.

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