Hello, Reader.
The bigger they are, the harder they fall.
That saying goes for erstwhile empires, champion sports teams, successful businesses… and shopping sprees. Specifically, splurging during Amazon.com Inc.’s (AMZN) Prime Day.
The online retail giant held its second deal extravaganza of the year this past week, on October 7 and 8. And early indicators show that its October Prime Day’s performance didn’t live up to the success of its four-day July event.
October’s average order size dropped 15% from July, down from $53.54 to $45.42. And 44% of orders were for less than $20, compared with 37% in July.
Even before this week’s lackluster Prime Day performance, I have long considered Amazon to be a “Sell.” And in today’s Smart Money, I’ll break down exactly why.
Then, I’ll introduce you to a different online retailer that I believe offers a better deal than any offered on Prime Day.
Let’s dive in…
Pressuring Profits
Now, I don’t usually recommend high-profile stocks. The reason is simple: By the time a company becomes a household name, its explosive early-growth phase is usually behind it.
Additionally, high-profile stocks usually carry high valuations. And a great company is not always a great investment when the price is too high.
But I made a rare exception in March 2023 when I recommended Amazon to my Fry’s Investment Report members. At the time, its AI investment opportunity was too large to ignore.
But what now has become too large to ignore is the company’s sky-high valuation and increased spending.
Since my initial recommendation in March 2023, Amazon has added around $1.3 trillion to its market value. In percentage terms, the company has advanced 137%, compared to the S&P 500’s gain of 74%.
I exited Amazon in October 2024, delivering my subscribers a return of 107%. And since then, Amazon’s AI spending is getting noticeably expensive.
The company’s free cash flow nosedived to $18.2 billion from $53.9 billion last year as Amazon ramped up capital spending on AI infrastructure. It spent $32.2 billion on property and equipment in the second quarter – close to double last year’s $17.6 billion. Most of that went toward data centers and AI capabilities.
Amazon is set to release its third quarter earnings for 2025 at the end of this month. And while they are expected to beat analysts’ expectations, I don’t recommend the Prime Day dealer. Spending is only rising and will soon put more weight on the tech giant’s profitability.
And there’s one other important factor I haven’t mentioned yet…
Getting the Best Deal
Tariffs.
Amazon is going to be one of the prime (no pun intended) victims of the current administration’s trade war, primarily the company’s core e-commerce business. Up to 70% of what you see on Amazon comes from China. Tariffs on those goods mean that Amazon could lose its competitive edge entirely.
In its last quarterly report, the company pointed to “recessionary fears” and “tariffs and trade policies” as factors that could impact its guidance, for the second consecutive quarter.
And on Friday, President Trump threatened a “massive increase in tariffs” on Chinese products imported into the U.S., citing export controls that China imposed on rare earths. Amazon fell around 5% as a result.
So, if Amazon isn’t the best deal on an online retailer out there, what is?
In my opinion, it’s a virtually unknown, fast-growing online retailer that could be like buying Amazon 20 years ago, but with an even bigger competitive advantage.
And the smart money is already moving away from Amazon and toward this online retailer. Projections are showing that it could become 700% more profitable by 2027.
I put all the details of this undervalued company in my special broadcast.
I also share a list of stocks I believe every investor should buy now – and what stocks everyone should drop immediately. These are under-the-radar, early opportunities that can help you protect and multiply your money during these make-or-break markets.
Regards,
Eric Fry
