It didn't seem to impact Jeff Bezos' wedding but shares of Amazon have made almost no progress so far in 2025. With YTD gains of only 2% $AMZN is underperforming the S&P500, not to mention fellow Three King Merchants Walmart and Costco:
I'm talking my book, and Amazon isn't quite the bargain it was before ramping off the Tariff Pause (more on that below) but shares of Amazon are probably the best deal consumers are going to find during Summer Christmas ("Prime Day" to laypeople) this week.
Here are three reasons to buy Amazon now:
1. The Consumer is Spending More Than Expected... at least at the good merchants
I hear the objections to this already. Retail sales were down in May. And according to surveys (or at least the headlines interpreting consumer surveys). At this point May was 100 years ago. In the here and now Amazon's Prime Day has been extended to 4 days, which essentially matches the week long copy-cat sales offered at Target, Walmart and the other retailers who have been trying to compete with Amazon's Summer Christmas since Amazon invented the secular holiday in 2015.
Remarkably, Amazon's share of the ~$24b spending pie is expected to rise this year, thanks to the additional days and a boost from third party vendors. Amazon makes much better margins from 3rd party, which normally account for about 30% of retail revenues. That figure is expected to move to ~45% for Prime Day this year, which should be enough of a cushion to offset and extra 2 days of discounts.
The new Tariffs are set to go into effect on August 1st. As I discussed in my note on Friday, expect plenty more sort of questionable news alerts on Tariffs this week. The initial reactions will almost certainly be negative for merchants but whatever the headlines suggest, and whatever finally happens, the long term winners are going to be Walmart, Costco and Amazon. Especially Amazon.
Only the Three Kings have the scale, cashflow and supply chains to, at worst, gain market share they can convert to profits over time. Tariffs aren't actually paid by foreign countries. They are a tax on the US companies bringing in product. Walmart will grind the extra cost out of the vendors because it can. Costco buys opportunistically and makes most it profits from membership dues, regardless.
Amazon makes most of its retail profits from the aforementioned 3rd party vendors by selling access to Amazon's astonishing fulfillment operation. Those vendors having tighter margins only increases their dependence on Amazon to provide the back end support.
3. The Technical Set-Up
I like my stocks to have good fundamentals, a pitch-friendly story and a strong chart. I can be talked into buying with 2/3 but a clean sweep is best.
Prime Day is Amazon's story, at least this week. AMZN has traditionally gone higher by ~1% the week after Prime Day and ~3% over the next month. Apparently the pure audacity of Amazon creating a summer promotion that's nearly 80% the size of Black Friday week continues to surprise people. It will again this year.
The fundamentals are great. Amazon has gone from a great retail story to one of the seven wonders of the capitalist universe over the last 10 years or so. PE is almost meaningless (Amazon earns whatever it wants) but at 35x fwd estimates Amazon is actually much cheaper than Walmart or Costco. Again, only the 3 Kings of retail win in almost any Tariff scenario. Buying the King that's not trading a 150% of its historic multiples makes the most sense.
Amazon has been "about $200" for over a year. At the April lows it was trading at pre-COVID levels. It has tested lows and found support. At this point both the technicals present a decent path to the old highs near $240 and a variety of stops at around $215 (YMMV when it comes to specific stops).
Amazon isn't a sexy idea but it's rare to see the company actually underrated compared to its peers in retail and tech. It's a stock you can trade long and need to own as a core holding.
The hottest gift for this Summer Christmas is buying yourself shares of the best retailer in the world before it gets back to ATHs. You can thank me in six months during the more traditional year end celebrations.
