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What History Says About Amazon Stock in December

The Amazon Maven looks at Amazon stock’s historical performance in December and draws important conclusions about owning shares at current levels.

The last month of the year has rolled in. Over the next 30 days, investors hope that Amazon stock  (AMZN) - Get Amazon.com, Inc. Report will add to its relatively modest 8% gain produced so far in 2021, which has been market-lagging by nearly 20 percentage points.

Today, the Amazon Maven looks back at AMZN’s historical performance in December. Has this been a seasonally strong period for the stock? What should investors expect to see in the next four weeks?

Figure 1: Amazon fulfilment center.

Figure 1: Amazon fulfilment center.

(Read more from the Amazon Maven: Amazon Stock in 2022: Growth At A Reasonable Price)

Amazon stock’s seasonality

The graph below depicts AMZN’s average returns by month since the 1997 IPO. The average monthly gains have been an oversized +3.9% over the past two and a half decades. However, the December performance has been historically soft: only +1.0%.

Figure 2: Amazon stock returns since 1997 IPO.

Figure 2: Amazon stock returns since 1997 IPO.

The reason for such underwhelming results in the last month of the year may have to do with the holiday season. Amazon has primarily been an e-commerce company (increasingly more of a cloud services provider lately), and much of the revenues tend to be generated during this period of heavy retail activity.

Notice how AMZN has surged the most during the September-to-November period, likely in anticipation of Black Friday and the start of the holiday weeks. December has likely served as a “sell the news” month that precedes the Q1 earnings season.

If only the last ten years are considered, Amazon stock has looked even weaker in December. The average return has been -2.2%, the worst average of all months of the year. The better news is that January has been the second-best month since 2012, at 6.5% gains.

Having said the above, the range of returns in December since the IPO has been very wide. Prior to the turn of the millennium, Amazon’s December returns swung from a low of -37% to a high of +67%. Since then (see chart below), the stock settled a bit, as the Seattle company matured.

The worst December of the past two decades for AMZN was in 2002, at -19%, when the market was still dealing with the impact of the dot-com bubble burst and ensuing recession. The best December was 2008, at +20%, driven by volatile market behavior during the Great Recession.

Figure 3: AMZN's December return by year since 2001.

Figure 3: AMZN's December return by year since 2001.

(Read more from the Amazon Maven: Amazon Stock: Expert Sees 25% Gains As Holiday Season Starts)

What to expect of December 2021?

Of course, seasonality offers only one set of data points to be analyzed. As the saying goes, history does not always repeat, although it can rhyme sometimes. While investors may feel discouraged about AMZN’s year-end trends, there are also reasons to be optimistic.

We have recently defended that Amazon, historically a pricey stock, may be approaching GARP (growth at a reasonable price) territory. A 2022 P/E of “only” 65 times is starting to look enticing against EPS growth projections of 40% per year in 2023 and 2024.

Maybe buying shares early in December, when AMZN is only a couple of percentage points away from entering correction (i.e. a 10% pullback from peak levels), may not be a terrible idea after all.

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Amazon stock tends to perform poorly in December relative to other months of the year. Should the seasonality trend discourage you from buying AMZN at current levels?

Is the price right?

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)