In the world of American e-commerce, Amazon (NASDAQ:AMZN) has been the undisputed heavyweight champion for years. Their annual Prime Day has become a highly anticipated event, monitored closely by analysts and investors alike.
By all indications, Prime Day — which kicks off on July 15 and is scheduled to last for 48 hours this year — has the potential to break records and send AMZN stock to new heights. Yet, it’s entirely possible that the hype has already been baked into the pie, setting Amazon stock investors for a painful post-shopping hangover.
Touted as a “parade of epic deals,” Prime Day has become e-commerce’s version of the Super Bowl halftime show; this year’s festivities will culminate in a performance from pop star Taylor Swift, if you can believe it.
And past Prime Day results have been record-setting, with Amazon selling $4.19 billion worth of goods on Prime Day last year, up from $2.41 billion the prior year.
As a contrarian investor, I view this as a cause for concern rather than as a reason to start accumulating AMZN shares now. With expectations running sky-high and Amazon stock selling close to $2,000, I see huge possibility for a letdown and more downside room than upside potential.
AMZN Primed for Problems
Amazon’s publicity machine would have us believe that past Prime Days went off without a hitch, but unfortunately that’s not the case. In fact, #PrimeDayFail has trended on Twitter (NYSE:TWTR) each year since the event’s launch in 2015. Some shoppers fail to find bargains above and beyond what they could find any other day of the year.
Moreover, last year’s event was beset with website outages, revealing Amazon’s inability to handle Prime Day’s high traffic volume. In a surprisingly amateurish blunder, internal documents at Amazon allegedly reveal that the company did not guarantee enough servers ahead of its biggest sale.
No Lack of Competition
If Amazon investors are expecting Amazon to clean up on Prime Day with no opposition, they’ve got another thing coming. On the same exact days (and somehow I don’t think that’s a coincidence), Target (NYSE:TGT) is taking Prime Day head-on with its own two-day sale extravaganza.
Known as “Deal Days,” Target’s two-day version of Prime Day requires no membership to get access to the deals, though shoppers with a Target RED card will save an extra 5% and have access to free two-day shipping on more products.
Walmart (NYSE:WMT), meanwhile, plans to front-run Amazon with its own online promotion of “special buys and rollbacks” one day ahead of Prime Day. Spanning the three days from July 14 to 17, Walmart’s deal days will include aggressive discounts of more than $100 on items like laptops and vacuum cleaners.
The Bottom Line on Amazon Stock
My biggest concern, ultimately, is that investors are assuming that people will spend more this summer than ever before — and that they’ll default to Amazon. Granted, last year’s Prime Day was quite massive, with 100 million products reportedly sold and spending estimates reaching an astounding $3.4 billion.
But therein lies the problem: there’s an escalation in investor sentiment and expectations, with each year having to top the previous one by a wide margin. As for me, I would rather wait until this year’s Prime Day has come and gone, watch for a disappointment and subsequent stock price decline, and consider grabbing up shares — my own version of a shopping spree.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.