How Prime Day Impacts Amazon Stock

If there’s one truism about markets and life, it’s that the more things change, the more they stay the same.  In no commercial pursuit is this tendency more consistent than in the drive towards consumerism.  While the next great political scandal, life-extending scientific discovery, or Elon Musk rant is perpetually around the corner, one thing we can count on is the will to spend, the urge to update to the latest and greatest, or simply the desire to capture that irresistible deal for the home technology gadget we’ve been eyeing.

To this end, three years ago on July 16th, 2016, Amazon.com (AMZN) decided to honor this urge with site-wide discounts, honoring the company’s 24th anniversary and the 13th anniversary of Prime, Amazon’s member services ecosystem.  The result is a 36-hour spend-a-thon called Prime Day, which not only is a big e-commerce spending event in the US, but also a huge driver of revenue for Amazon. 

We know Prime Day is economically beneficial to the firm; the first year the company reported a 60% revenue increase compared to same 36-hour window the prior year.  But what about the stock price?  As both analysts and students of the market, we decided to run the numbers and find out what returns looked like going into, and coming out of Prime day, over a 1, 5, and 10-day return period.

This is mostly to satisfy curiosity – it’s tough to draw much inference from only two, one day samples. That said, we can see the launch of Prime Day in 2016 didn’t draw much reaction from the markets, with AMZN stock price dropping -0.78% before the event and rallying just +0.09% after.  By 2017 however, that had changed, and the hype was real; the day after Prime Day saw a +0.82% rally.

Five-day returns follow a similar pattern - the market wasn’t sure in 2016, but by the time 2017 rolled around, the rolling 5-day return coming into and out of Prime Day was positive, +2.36% and +2.38% respectively.  Notably, this year the stock has rallied almost 6% going into the event - it will be curious to see if the hype is getting ahead of itself and the market sells the news or if the rally extends in the next 5 days.

Here, I think the most notable thing is over a two-week window (10 trading days) the clustering is much more positive.  This might be the result of AMZN having been, for the most part, in a strong uptrend the last few years.  Nevertheless, it’s interesting to note that in both 2016 and 2017, the stock advanced greater than 2.5% in the days following Prime Day.  Will this positive price performance continue in 2018? Only one way to find out!

Mapping company events is a key way to measure the market’s expectations both price-wise and sentiment-wise.  In the case of Amazon, in the days surrounding Prime Day, this has reflected mostly bullishly.  To learn more about the way we modeled this data, take a look at Investopedia Academy's Apple Data Mining Case Study in Excel course.  Although we made a few tweaks to measure Prime Days, the general concept is the same and the model is a great tool to analyze impact of corporate events.