Amazon Stock Benefits From Prime Day; Planet Earth, Not So Much

Amazon’s (NASDAQ:AMZN) Prime Day event took place between June 21 and 22 this year. On June 22, AMZN stock had its highest closing price ever at $3,505.44, with the highest price of the day falling just a bit short of the April 30 all-time high of $3,554.

stack of Amazon (AMZN) delivery boxes at a front door

Source: Julie Clopper / Shutterstock.com

The 2020 version of Prime Day hit $10.6 billion in global sales, 49% higher than in 2019. And even though Canada’s Prime Day was postponed due to Covid-19 concerns for its staff (along with postponements in many other countries), it delivered an estimated $11.2 billion in sales worldwide.

While Prime Day is great for Amazon and its stock, it’s terrible for the planet in so many ways. Let’s discuss three of the biggest problems.

Jeff Bezos Speaks to Shareholders for Last Time

Jeff Bezos delivered his final shareholder letter as CEO of Amazon in mid-April.

In it, he reminds readers that the company has created $1.6 trillion in value for shareowners. He then recites a touching story of how middle-class parents who bought their kids IPO shares back in 1997 wrote the CEO to say how much that act changed their lives. One of their two kids even bought a house with his portion of the booty.

Bezos went a step further. He calculated that adding together the value created for shareholders, employees, third-party sellers, and customers comes to $301 billion of additional value created by Amazon in 2020 alone.

“If you want to be successful in business (in life, actually), you have to create more than you consume. Your goal should be to create value for everyone you interact with,” Bezos stated in the shareholder letter.

“Any business that doesn’t create value for those it touches, even if it appears successful on the surface, isn’t long for this world. It’s on the way out.”

Bezos’ Vision and AMZN Stock

There is no question that Bezos is a visionary. Nor can it be denied that he’s delivered for shareholders — a 24-year annualized total return of 38% through June 30 — but I sometimes liken the world’s wealthiest person to a master magician.

While you’re following his rhetoric over there, over here, his company is wreaking havoc on the world.

But because someone bought a bunch of shares 24 years ago — and made a killing — Bezos walks on water.

It doesn’t matter that his climate pledge is quite possibly a public relations stunt. Instead, he’s using it to keep people’s minds occupied on a subject that’s far removed from the truth.

That said, I’ve managed to keep my dislike for Amazon’s cup-and-ball trick from clouding my investment judgment. In January 2018, I predicted that Amazon stock would hit $10,000 in 7.5 years. That’s June 2025.

On June 30, it opened at $3441.06. It will have to deliver a four-year compound annual growth rate of 30.6% to get there.

I believe it will be successful.

AMZN Stock and the Climate Pledge

Bezos’ shareholder letter takes up seven long paragraphs — just over a page —  on the company’s climate pledge.

“53 companies representing almost every sector of the economy have signed The Climate Pledge. Signatories such as Best Buy, IBM, Infosys, Mercedes-Benz, Microsoft, Siemens, and Verizon have committed to achieve net-zero carbon in their worldwide businesses by 2040, 10 years ahead of the Paris Agreement,” stated pg. 5 of the shareholder letter.

Amazon’s one of the 53 names. It swears 100,000 electric delivery vans made by Rivian will be on the road by 2030. Very commendable.

However, when you read The Atlantic contributor Ellen Cushing’s June 22 article about canceling Prime, you realize that the Climate Pledge could turn out to be window dressing for the more than 100 companies that have signed up.

“Prime is Amazon’s greatest and most terrifying invention: a product whose value proposition is to help you buy more products. With 200 million subscribers worldwide, it is the second-most-popular subscription service on Earth, poised to overtake Netflix in the not-so-distant future,” Cushing wrote.

The Cost to the Planet

Cushing says that, due to the pandemic, Amazon Prime now has more members than the U.S. has households. In 2020, Amazon generated $25.2 billion in revenue from Prime and the rest of its subscriptions. That’s a big business by itself.

Unfortunately, the cost to the planet of Prime is real.

“Amazon’s warehouses bring traffic and pollution to the neighborhoods they’re in, many of which are poor. After products leave the warehouse, they are shipped, at no small cost to the planet, to their destination,” Cushing writes.

Amazon has a moral obligation to complete its pledge commitments on time with the benefits to the planet actually moving the needle from a climate change perspective.

However, something tells me that just like the company’s statement that it’s all for increased corporate taxes, it doesn’t really mean it. Between 2010 and 2020, Amazon’s effective federal tax rate on its $57 billion in pretax U.S. income was 4.7%.

My guess is most shareholders of AMZN stock paid more tax over the past decade. That doesn’t bode well for climate change. I hope I’m wrong.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


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