Amazon Falls, Despite Best Sales Day Ever: What Is the Takeaway?
On Tuesday, Amazon.com (AMZN) - Get Report had its second Prime Day, and sales increased 60% from a year earlier.
But despite the historic day for the e-commerce giant, Amazon shares fell Wednesday and are up just slightly Thursday, opening the door for savvy investors.
The event that Amazon refers to as its very own shopping holiday was started last year on July 12, marking the company's own anniversary. Prime Day is geared toward getting more Prime membership customers by offering deep discounts on millions of different products.
Amazon told news outlets that this year's Prime Day was the "biggest day ever," with more than 90,000 televisions sold and its own Fire TV Stick the top-selling item.
In addition, Amazon said that more than two and a half times as many Amazon Echo smart speakers were sold this year, compared with last year's Prime Day.
By nearly all measures, Prime Day appeared to be a huge success, though CNBC reported that some smaller vendors experienced flat sales compared with a year earlier.
Although Amazon's retail customers are important to the company, the real growth for investors is being driven by the company getting more of its own products into consumers' hands.
In other words, the more Echo hands-free speakers, Fire TV sticks and Prime memberships sold, the more powerful the company becomes, which will in the long run circle back to Amazon retail vendors, helping them sell more products on Amazon.com. This is what is key for investors to understand.
For example, Amazon Prime membership offers free two-day shipping. Walmart, meanwhile, just cut its $50 minimum on free shipping for the week and is now offering free two-day shipping for an annual fee of $49.
As other companies see the power of Amazon and attempt to fight back by offering similar deals, the importance of customers being connected to the Amazon ecosystem becomes ever more important.
In the same way that Apple wisely pulled customers into its ecosystem with its products, Amazon is doing the same thing with Echo, Prime and its other offerings.
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With every device that Amazon sells and every Prime member it signs up, the higher the switching costs and the less likely that Walmart will gain ground, especially in the e-commerce arena.
Investors should be buying Amazon after its record-breaking day, especially after the stock declined on Wednesday. Load up on shares before the rest of the market gets wise.
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This article is commentary by an independent contributor. At the time of publication, the author held positions in Apple and Amazon.