Why Amazon Prime Day Doesn't Mean Much for AMZN Stock

AMZN earningsWhat is Amazon Prime Day? "Like Christmas in July with more deals than Black Friday."

That's how Amazon.com Inc. (Nasdaq: AMZN) is billing its one-day shopping event on July 15. Wednesday's bargain-hunting extravaganza is in celebration of the e-retailer's 20th anniversary.

Dubbed Amazon Prime Day, the event will offer Amazon Prime members exclusive deals on electronics; toys; video games; movies; clothing; patio, lawn and garden, sports, and outdoor items; and more. The deals will be available for customers in the United States, the UK, Spain, Japan, Italy, Germany, France, Canada, and Austria.

While customers must be a member of Amazon Prime to get the deals, the company is offering a 30-day trial period to promote the plethora of sales. In addition to immediate access to the July 15 deals, the Prime membership ($99 annually) includes free two-day shipping on millions of items, unlimited photo storage, instant streaming of thousands of movies and TV shows, and instant access to a seemingly endless library of Kindle books and music.

The real premise behind Prime Day is not about providing bargains. It's all about boosting Prime membership. Prime, which marked 10 years of existence on February 3, is a significant sales tool for the online retailing giant.

Indeed, when someone signs up for Prime and ponies up the $99 fee, they try to get the most out of their membership and make Amazon their one-stop shop.

"It's absolutely core to our retail business," Greg Greely, Amazon vice president and head of Prime, told the Seattle Times in February.

Worldwide Prime membership surged 53% in 2014. The hope is Prime Day 2015 will goose that figure further.

The event will likely "drive some incremental sales volume," as retail sales in July tend to dip and don't pick up much until back-to-school shopping starts, according to market research firm NPD Group. But the overall bump up in sales may be muted. If Amazon really wanted to juice sales, it would offer Prime Day deals to non-Prime members as well.

Plus, these rivals are getting in on the act...

Amazon Prime Day Competitors

Retailing giant Wal-Mart Stores Inc. (NYSE: WMT) is rolling back prices on some 2,000 online items in a move not to be outdone by Amazon.

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The discounts will be offered on electronics, home items, baby items, toys, and more and will be good for 90 days, the typical time period for Wal-Mart rollbacks. Additionally, Wal-Mart is trimming the minimum order for free shipping to $35 from $50 for at least 30 days.

In a blog post on Monday, Wal-Mart criticized Amazon for making its lower Prime Day prices available only to Prime members. Wal-Mart said it doesn't believe you should pay a fee to get a better price, adding that it's "standing up for our customers and everyone else who sees no rhyme or reason for paying a premium to save."

And for the sixth consecutive year, discount department store chain Target Corp. (NYSE: TGT) is holding its Black Friday in July sale this week. Among the specials Target is offering are buy one, get one 50 off%; an extra 10% off with coupon; and free shipping on most orders over $25.

Best Buy Co. Inc. (NYSE: BBY) will also host its own summer sale event July 24-25. For the third straight year, Best Buy shoppers can expect deals on computers, appliances, home theater equipment, and more.

So, what does Amazon Prime Day mean for Amazon investors?

In short, not much.

Amazon Prime Day a Deal for Shoppers, Not Investors

Investors looking for Amazon Prime Day to boost AMZN's earnings and revenue are likely to be disappointed.

That's because Amazon has never seemed particularly concerned about profits.

For all of 2014, Amazon boasted revenue of $89 billion. Operating income, however, was a scant $178 million, which resulted in a $241 million net loss.

There's no denying that Amazon has generated some remarkable revenue growth over the years. Still, in its two decades, it has never shown it can consistently generate profits or make money.

Heading into Amazon Prime Day, it seems while consumers are likely to see some awesome shopping deals, investors won't reap any real benefit since Amazon historically has had a lack of concern over profitability.

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