From time to time, a market leader has to remind everyone of how powerful it truly is. Amazon (NASDAQ:AMZN) undoubtedly leads the U.S. e-commerce category, but some AMZN stock traders might start to take the company for granted.
Plus, the skeptics might argue that the share price is just too expensive. As a value-focused investor myself, I sympathize with this viewpoint.
Yet, just because AMZN stock is pricey, this doesn’t mean that it can’t go higher. There were folks who thought the stock was overpriced five years ago, back when it was below $1,000.
Of course, the share price is much higher today – and I’ll admit that the stock isn’t cheap. Yet, when we reflect on a monumental shopping event that recently took place, it’s not hard to justify Amazon’s “prime” position as a category dominator.
A Closer Look at AMZN Stock
When we look at the big picture, it’s interesting to observe that the onset of the Covid-19 pandemic barely put a dent in the AMZN stock price.
In March of 2020, at the peak of the crisis, Amazon shares sank to $1,700. However, it didn’t stay there for very long.
As America went online to shop for just about everything, the AMZN stock price reflected the new renaissance in e-commerce.
By early September 2020, the stock was already up to $3,500. Here’s where it gets really interesting, though.
That $3,500 level provided a powerful resistance point for AMZN stock. Several times, the bulls attempted to break through that level but were foiled.
The battle rages on, with Amazon shares trading recently around $3,448.
There’s an old saying in the financial markets: the longer the base, the higher in space.
Could the AMZN stock bulls be bracing for a massive rally in the near future? The breakout moment, if and when it happens, could be truly intense.
Finally, let me add that Amazon’s trailing 12-month price-to-earnings ratio is 65.62. That’s elevated, but not as outrageously high as some skeptics might have expected.
The Big Event
It could be said that Amazon’s Prime Day is the e-commerce equivalent of the Super Bowl.
Yet, the stakes are particularly high in 2021 as the market wants to see signs of a recovering economy in the wake of Covid-19.
In other words, all eyes were on Amazon as its annual Prime Day shopping event took place on June 21 and 22 this year. (Yes, it’s technically two days even though it’s called Prime Day.)
Due to sizable discounts on a number of items, Prime members purchased more than 250 million products during the Prime Day event.
Impressive sales were reported in the home goods, electronics, beauty, apparel, nutrition, tools and other categories. Back-to-school supplies were also strong sellers.
Importantly, customers purchased more than 70 million items from small and medium businesses.
Shoppers spent more than $1.9 billion in purchases from small and medium businesses, representing a year-over-year improvement of more than 100%.
The Halo Effect
Astoundingly, total online retail sales in the U.S. during the 48-hour Prime Day topped $11 billion.
Adobe Digital Insights analyst and director Taylor Schreiner offered an explanation for the robust results.
“There’s a pent-up demand for online shopping as consumers look forward to a return to normalcy,” Schreiner explained, clearly alluding to consumer behavior in a post-Covid world.
Schreiner even suggested that Amazon’s mega-event was so significant that it enhanced the broader e-commerce sector’s bottom line.
“The halo effect of Prime Day … played a significant role, giving both large and small online retailers significant revenue lifts,” Schreiner said.
The Bottom Line on AMZN Stock
Is AMZN stock expensive? Maybe, but there’s still room for a breakout moment this year.
And if you need proof that Amazon is still a category leader, just check the Prime Day stats.
As America continues to shop online, Amazon’s influence will remain considerable, and irrefutable.
On the date of publication, David Moadel 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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
