Amazon Moving Prime Day to Q2 to 'Experiment' With New Timing
The “prime question” for Amazon shares is whether e-commerce gains from the COVID-19 pandemic will persist against tough compares of 40%, 37% and 44% over the next three quarters, wrote Canaccord analysts Friday after the company posted Q1 revenue growth of 44% to $108.5 billion. Revenue exceeded the high end of the guidance range by $2.5 billion. Net income was $8.1 billion, vs. $2.5 billion. Shares hit a 52-week high Friday morning at $3,554 before closing down 3.9% at $3,467.42. Canaccord raised its price target to $4,400 from $4,100.
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In Amazon’s Q1 earnings release Thursday, CEO Jeff Bezos referenced two Amazon “kids” -- Amazon Prime Video at 10 years old and Amazon Web Services at 15 -- as “growing up fast and coming into their own.” More than 175 million Prime members streamed videos in the quarter, up 70% year on year. AWS has become a $54 billion annual run rate business, Bezos said. On a Thursday earnings call, Chief Financial Officer Brian Olsavsky said many businesses turned to the AWS cloud during the pandemic, rather than investing in their own technology infrastructure, a trend the company expects to continue “as we move into the post-pandemic recovery.”
Amazon Prime Day is moving to Q2, Olsavsky said, after COVID-19 forced the e-tailer to push the 48-hour sales event to October due to supply constraints. He didn’t provide dates but said the company decided to hold it in Q2 vs. the traditional Q3 because of the Summer Olympics and because “July is a big vacation month.” It might be better for customers, sellers and vendors to “experiment with a different time period,” he said. The number of Prime members reached 200 million in Q1. For Q2, assuming Prime Day takes place in the quarter, Amazon guided to revenue of $110 billion-$116 billion, representing 24%-30% growth.
On Amazon’s Logistics investment, Olsavsky said costs are competitive with external options, and the company has the ability to “control the whole flow of products from the warehouse to the end customer.” It can now have orders leaving warehouses five or six times a day, vs. handing off a large batch of orders once a day, then going through “middle mile” and on to customer delivery either through Amazon or demand-side platform partners.
Amazon is making “a lot of progress” in the Logistics delivery business, which customers will see through more precise delivery estimates, Olsavsky said. Cutoff times can be extended “because we pretty much have perfect information between the order placement allocation to warehouses," where Amazon employees pick and box up product, then send it on its way, he said.
Amazon has benefited from the pandemic “more than any other company in the world,” Wedbush analyst Michael Pachter wrote investors Friday. The company charges consumers and organizations “for sticky services that make everyday tasks easier, and in return gains data on its users," which powers its network and allows for a "flywheel effect.” Over 60% of Americans are paid Prime members, said the analyst: “Its ability to revolutionize the way customers shop, store data, and form other new habits poses enough value to lift its share price for years to come.”